UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 1031-iv

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

DEFENCE COMMITTEE

 

 

FUTURE CAPABILITIES

 

 

Wednesday 17 November 2004

AIR CHIEF MARSHAL SIR MALCOLM PLEDGER KCB OBE AFC,

MAJOR GENERAL A J RAPER CBE and MAJOR GENERAL M D WOOD CBE

Evidence heard in Public Questions 385 - 500

 

 

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Oral Evidence

Taken before the Defence Committee

on Wednesday 17 November 2004

Members present

Mr Bruce George, in the Chair

Mr James Cran

Mr Mike Hancock

Mr Dai Havard

Richard Ottaway

Mr Frank Roy

Rachel Squire

________________

Witnesses: Air Chief Marshal Sir Malcolm Pledger KCB OBE AFC, Chief of Defence Logistics, Major General A J Raper CBE, Defence Logistics Transformation Programme Team Leader, and Major General M D Wood CBE, Director General Logistics (Supply Chain) examined.

Q385 Chairman: Gentlemen, sorry we are a little late. Sir Malcolm, in December 2002 you gave evidence to us for our inquiry, A New Chapter to the Strategic Defence Review. You had been in post just a couple of months. The MoD's Annual Report and Accounts 2003-04 states that a new Chief of Defence Logistics will be in post at the start of next year. To what extent do you think that you have achieved the objectives that you set yourself? I must warn you that somebody else who talked about objectives and said he failed to reach six out of the seven of them had a really difficult time giving such an honest reply. I hope you have achieved all of your objectives.

Air Chief Marshal Sir Malcolm Pledger: I think to begin to answer that, Chairman, we have got to look back at the time of appointment and understand what the objectives were then and understand how the process has moved on. At that stage, of course, the main objective, as you reminded me, was to achieve a strategic goal on the formation of the DLO. Since then, as I say, we have moved definitely into the arena of trying to better align logistic endeavour with the new challenges that we have in this uncertain world and, whilst delivering that strategic goal on efficiency, managed the dependencies that we have within the strategic base with industry. Those I would outline as currently my three objectives. I would say that already we have banked in programme terms the strategic goal by the end of 2006. We still have to deliver but in programme terms we have achieved that. I think we have made significant progress in recognising the new challenges that we face of expeditionary employment in these strategic distances and we can explore some of the things we have done since we discussed lessons from Operation Telic to show you how we have improved. Also, we have what I would call strategy now to better engage with those industrial dependencies by which we fulfil our remit: acquisition. On the one hand I would say good progress and, on the other, I would have to say that of course there is still a long way to go to resolve all of those issues.

Q386 Chairman: But two years is too short a time to have somebody in post taking such a lot of very difficult decisions because of so many problems to be resolved. Right, you agree. Since you took up post two years ago, what do you think the main difficulties have been because there are always countervailing pressures to any reform and the reform agenda was obviously a very long one?

Air Chief Marshal Sir Malcolm Pledger: Again, I think there are several facets to that, Chairman. The first is that change in any organisation is usually impeded most by the behaviour of that organisation and it's, what I would call, dependencies on traditional methods. Clearly I think much of that was overcome because of our employment in such areas as Iraq and Afghanistan recently which proved categorically to everybody involved that we needed to change the processes to make this a successful supporting endeavour to those operational challenges. On the one hand there will always be behavioural issues but, on the other, I think most of those have now been overcome because of the nature of our employment.

Q387 Chairman: You mean the - failure may be too strong a word - problems that emerged from logistics in those very far distant shores really compelled even those who wished to retain more traditional approaches that change really had to come and it was self-evident that change had to be made?

Air Chief Marshal Sir Malcolm Pledger: I think I would use a slightly different interpretation. The difficulties that we experienced of those, I could not call them failures because ----

Q388 Chairman: I must look at the text. Did I say failure?

Air Chief Marshal Sir Malcolm Pledger: We were successful in those operations. It did highlight areas where we can improve and, such was the importance of those areas from a collective perspective, not just a logistic one, we are now making significant progress across what we call the end-to-end regime that is truly logistics.

Q389 Chairman: How long will it take before you or your successor will be able to say "we have got things right now, all the necessary changes have been made?" Is that ever achievable in the Ministry of Defence?

Air Chief Marshal Sir Malcolm Pledger: I think that the nature of operations will mean that in some areas we will have to manage difficulties for the foreseeable future. You cannot plan for everything and resource everything but in terms of the processes that we are going to employ and the efficient application of those processes, and the supporting means to deliver them, I think for much of it, if I can use the supply chain as illustrative here, we will have solutions in place within three years.

Chairman: The MoD said it could not go to war before 2007/08 so we are in good shape then, Air Chief Marshal. No more provocative questions for a while. James Cran. James can hardly speak, so if you cannot hear what he says please ask him to shout.

Q390 Mr Cran: Can I apologise for my voice. Still on the End-to-End Logistics Review. The MoD's Annual Report and Accounts for 2003-04 said this: "in July 2003 a review of 'end-to-end Air and Land logistic support reported on how logistic support to Air and Land forces, including Naval Aviation and the Royal Marines, can be streamlined..." and so on. That rather begs the question as to why the maritime environment seems to have been excluded. I hope we do not need an Admiral here to answer that. If that is correct, why is it so?

Air Chief Marshal Sir Malcolm Pledger: Again, I think we have to look at the context in which we conducted that study. Already what I will call the surface ships and the submarine elements of the maritime logistic community had gone through significant end-to-end rationalisation and change which was continued with the formation of the DLO. For example, we, in the DLO, already own much of that end-to-end right up to the jetty, indeed starting with the contractorisation of the dockyards in 1987 and the then formation of the two agencies, the Naval Base Support Agency and the Ship Support Agency, which in turn have been merged into the WSA, and then was put into the DLO. We already had what I will call the mechanisms of the organisation for end-to-end management of maritime logistics and that was why we concentrated on the other two areas which were substantially different on transfer into the DLO. Certainly since then we have not said that it is not included in the further Transformation Programme as we apply all the lessons of that end-to-end study across the three environments, not just the two. General Raper can talk a little bit more about which elements of the maritime logistic endeavour we are concentrating on currently. It was deliberate, if you like, recognising where they already were, but they are now incorporated in the full Transformation Programme.

Major General Raper: If I could just pick up on your remarks. You mentioned that clearly we have taken the aviation elements into forward with the Navy, so everything in terms of their rotary platforms is considered as part of the overall rotary Transformation Programme, no exemptions, same lessons being applied. Where we are now beginning to have a look is in a number of areas having done warship support modernisation and we are now looking at the submarine acquisition area in terms of the overall support as well as acquisition of all the submarine platforms as more of an holistic whole. Also, we are revisiting the ship support arrangements, again having moved, and also the base porting and much of that is as a result of the Future Capabilities work. Now is the time to look at that and look at that through the same eyes as we were looking at everything else in the Transformation Programme.

Q391 Mr Cran: Just so that I get it clear in my mind, any recommendations arising out of the End-to-End Review would apply to the maritime environment too, would they?

Air Chief Marshal Sir Malcolm Pledger: Where appropriate, absolutely right.

Q392 Mr Cran: Just let us know what the words "where appropriate" mean?

Air Chief Marshal Sir Malcolm Pledger: Clearly, some of the recommendations were specific to the environment we are talking about. They were also specific to the industry that supports that environment and, therefore, not all of them were absolutely translatable into the maritime environment. Where there are principles here, for example in depth and forward, those kinds of concepts are being applied equally in the maritime environment.

Mr Cran: I am grateful. That is all my voice will allow. Chairman, over to you.

Q393 Rachel Squire: In his statement to Parliament on 10 September 2003, the Minister said that a key change proposed by the End-to-End Review was a "permanent, joint organisation...to establish and prioritise a joint supply chain that will be driven by the needs of the joint commander of operations". Can you say what progress has been made in establishing such an organisation and developing a joint supply chain?

Air Chief Marshal Sir Malcolm Pledger: Yes. The announcement was entirely consistent, again, with what we are trying to do in Transformation. It records what I would call the different components of the supply chain. Again, when we last gave evidence here we showed that in essence there were three elements to this. There is what I would call the strategic base, the factory arrangements, the acquisition means to support these endeavours, there is the forward element, which is done in the operational theatre, and then there is the so-called coupling bridge between the two. The whole new concept is in order to create agility and flexibility and improve our timelines and response rather than pushing, which we have done in the past, from what I will call factory into foxhole, which in turn creates huge stresses on component parts of those three elements, we are now trying to create a demand system, a pull system, which serves the needs of those fighting in theatre. Part and parcel of that is because that demand has to be articulated by the Chief of Joint Operations in whatever guise he is fighting in theatre, to construct the means of demand, priorities and volumes before we start to push. It is in creating that focus and then managing it more effectively in theatre that this relates to. There are two elements of this. We have already identified the solution to what I would call management in theatre with one of the brigades we are going to use to do that, and we are already setting up the core elements of that decision-making in theatre which we can reinforce in future so that we can manage this rather than push it. The brigade is already identified, nominated, it has undergone some of the training to make good some of the deficiencies we saw in Telic and, as I say, the core element of what we call the Joint Force Logistic Component Commander within the deployed headquarters is now in place.

Major General Wood: We have done joint force logistic components doctrinally for some time but the new development is a permanent establishment of that. That brigade headquarters will be in place and the newly appointed brigade commander will be in place before the end of this year and he will be working in Northwood in a permanent joint headquarters. That is the organisational element, the creation of a permanent joint forces logistic component which is readily deployable as opposed to double-hatting it with an existing capability, which is how we created that doctrinal piece before. In terms of the joint supply process, that is not completely new, it is ongoing. What we are doing is improving it. If you take last week's operation, Op Phyllis, to the Ivory Coast, that was the supply chain in operation. You can see it in terms of a relative Land component, strategic airlift being used and a ship being diverted to be available, but in order for that deployment to take place stores were issued from the depots, medical prophylactics were issued, munitions were issued, clothing was issued, including body armour, rations were issued, fuel was issued. That was the joint supply working to get that force available to move in the demanding time frames that were expected of them and with the success that we saw. That is the process day in and day out, it is happening every day to support people in deployed operations elsewhere as well.

Q394 Rachel Squire: That is the really crucial thing. It is all very well to say that it has been issued from various depots and so on and it is all very well to say it survives somewhere on the Ivory Coast or, most importantly, in Iraq, but the crucial thing, and I still hear it whether I am in this country or I am away elsewhere, in Iraq or elsewhere, is once it arrives into the country does it actually get to those literally in direct line? Even yesterday I was hearing a bit of criticism, shall we say, that it is still not happening as it should be. How can you ensure that the arrival of materiel in the theatre of operations is in the right order, in the right place at the right time and ensure that it is effectively used 100 per cent?

Air Chief Marshal Sir Malcolm Pledger: Clearly that is crucial. I am surprised you are still hearing that there is what I will call issues in those areas. Again, I will ask General Wood to describe what is going on in one of those theatres currently. We have now created the opportunity for the demander to see where his piece of equipment or requirement is in that supply chain, which in turn has created much more confidence in that user. We are delivering, for example, in Iraq within 24 hours of arrival in theatre. That is clear and apparent and visible to them. I say I am surprised because I have no evidence whatsoever that in the sustainment phase of operations, because that is where we are at the moment, we are not able to see, manage and satisfy the demands of those people in the timescales that they have asked for them.

Major General Wood: On my specific reference to Op Phyllis, there the challenge was to get it to the airhead because that was where they were being deployed from. It is a different challenge into Iraq in terms of sustainment of an established operation there but, as CDL said, we have done a lot of work, and that is a corporate "we", in conjunction with the permanent joint headquarters and the people deployed in theatre. I do not wish to command them, and nor would I wish to command them, but in conjunction with the people in theatre we have made the in-theatre delivery in Telic, in the Iraq theatre, a 24 hour operation and we have speeded up the delivery at this end to seven days for UK and North West Europe. At both ends of this end-to-end process we have quite considerably reduced the time that we were giving ourselves to get demand into people's hands. It is those people, those men and women, who are our most demanding customers. They are the people who we are doing this to satisfy.

Q395 Rachel Squire: Can I just be clear that you are saying that the logistic lessons identified from Operation Telic have really played a crucial part in delivery to ensure that whether it is a private or a commander, when they are in an operational theatre they get the equipment that they need when they need it.

Air Chief Marshal Sir Malcolm Pledger: I think I am describing improvements to that end which currently we are doing in theatre that we have mentioned, to their satisfaction against their demand requirements. I state that categorically. We have done that by modification to some of the systems and by modification to some of the processes. It has been enormously helpful, as the General says, that I do not command those who do much of this activity in theatre, but I do now own the process and, therefore, we have been able to modify those processes that they use at their own behest to satisfy their demand. That has been enthusiastically received by all contributors and, as I say, the end user is now able to see much of what he needs because of our modifications to the current information systems. That is not the end of the process. This is in a sustainment regime where, I have to say, the predictability and the management is easier than in the priming function of any large operation. We still have to develop the right management information systems to make this work even more effectively. We are embarked upon those, there is a series of them: management of materiel in transit; management of the deployed infantry; and so on and so forth. Currently we have modified our existing arrangements but we will take the next step to make this process even more effective and efficient with those new information systems.

Rachel Squire: Thank you. When you move on from your current job maybe we will have a chance to travel to parts of the world and check out that things have been delivered that are needed.

Chairman: The problem is not just one for the military, Sainsbury's have been having difficulties getting things on to their shelves and their strategic environment is maybe less demanding but much larger than that of the Ministry of Defence.

Q396 Richard Ottaway: Can I go into the tracking aspects in greater depth. The review said that it was "fragmented and poorly connected". What investment have you put into it? Does that investment include the maritime environment?

Air Chief Marshal Sir Malcolm Pledger: Perhaps I could just kick off and then ask the Director General of the supply chain to take you through some other elements of this. You were saying "poorly connected", but one of the major successes, of course, of Telic and the mounting of Telic was the introduction of the TAV minus which did allow us to have constant and complete visibility to what I would call the point of entry. That was done as an urgent operational requirement but has now been formalised and is in active day-to-day use in order to overcome one of those elements of this end-to-end arrangement to get the asset visibility as well as the consignment visibility.

Q397 Chairman: We will be coming on to asset tracking in more detail later on.

Major General Wood: You do not want me to answer that now, Chairman?

Q398 Chairman: Just briefly.

Major General Wood: We do visit theatre, we get a constant flow of information from theatre and, as CDL said, we are trying to meet the priorities as set from theatre. The comparison with supermarkets is interesting because where is the checkout in the military supply chain? What we have done is taken a family of projects and drawn them together into a co-ordinated programme so there is consignment visibility, and you have heard about the system called Vital, we are improving Vital, Vital Version 4 is just being released, Version 5 is being prepared which will deal with the acquittal. There is a demand tracking system which we did pick up from the maritime environment because of my joint responsibilities, which is applicable to the other environment, which allows you to know where a demand is at any one particular time. That is in the field of the management of materiel in transit. In terms of the joint deployed inventory area, we have had a study going on inland with the system that the Air environment currently uses which does appear to be applicable and only yesterday signatures were put on a piece of paper declaring Land's commitment to this particular functionality and, therefore, we will roll that out to support all three surfaces, Land and Air first and then we will see if we can make it fit into the maritime environment. Those are all steady progress steps but they add together to improve our capability quite substantially.

Air Chief Marshal Sir Malcolm Pledger: It comes back to this recognition that logistics is an end-to-end function, not a series of separate endeavours. As I say, my process ownership designation now allows us to range across the whole of the execution chain and make sure that it is integrated and the fragmentation that you describe to be a thing of the past.

Q399 Richard Ottaway: Is everything tracked?

Major General Wood: Everything always was tracked at the point of issue. Every single thing that leaves the depot in the UK is swiped and coded and tracked. The challenge gets greater further forward and it is that last mile which is the most demanding piece. The network that we have of automatic tracking capability has been further extended into Afghanistan, further forward in Iraq, to give that automated reading capability because one of the challenges with Vital, hence my specific reference to the need to improve it, is that it was a relatively old-fashioned system and it was quite time and labour intensive to complete the screens and very busy people dealing with very large volumes were not always able to complete all the screens and you lost that piece of the picture which was giving you your complete end-to-end visibility trail.

Q400 Richard Ottaway: Are you using barcode technology?

Major General Wood: Everything that leaves the depots in this country is barcoded and was barcoded during Telic. It is easier to do in that environment, it is beyond that.

Q401 Rachel Squire: Just picking up the end-to-end process. Can I place the critical role of industry in all of this. The End-to-End Review certainly acknowledged that industry has a critical role to play in the delivery of future logistic support. Can you say what role you see industry playing in the delivery of future logistic support? Is "just-in-time" still a solution, given the experience on recent operations?

Air Chief Marshal Sir Malcolm Pledger: Again, if I could just explore the words there. You say "in future" industry has a role. Currently industry has a major role in the means of providing logistic support to the Armed Forces. About two-thirds of my budget on a day-to-day basis is already spent with industry. This is not an organisation that does all its own provisioning by any stretch of the imagination. We have to have a relationship and a means of managing the industry in a way that is equally as agile to our needs as we require it from the Armed Forces. That is why I said in my opening comments that the relationship with industry and the means of getting them to respond was the third of my major objectives. I would say in operational terms that their responsiveness to such examples as UORs and contractors on deployed operations has been excellent. In one respect we already have a relationship that is hugely responsive and effective, but I would then have to move on and say I also have to make this system efficient and, therefore, I have to create different ways of doing business in that acquisition space to prove that we are getting good value for money as well as a responsive provider. That is a core element of the Transformation Programme that we are embarked upon and what I would call the main part of what we are trying to develop in partnering support in the future where those dependencies are clear. We have to create something that is good value for money in the strategic base but also is responsive in the way that we showed with Telic at the same time; we must not break one for the other. I come back to one of my objectives is that strategic goal of significant efficiency, which is why we are trying to create that different relationship. One real advantage from that is we should use many of their management systems, not create our own, which is why in future incrementally in IT, shall we say, we are not looking to create something that we talked about in the past of DSMS - Defence Stores Management System - we are looking to use their systems because their systems have to be efficient to create shareholder value. We do not need to duplicate that. We need to draw on their materiel. Whether that means "just-in-time" is an issue for us to decide upon as far as I am concerned. The real question is, is "just-in-time" from industry an acceptable operational risk, is "just-enough" an acceptable operational risk, or do we have to build in what I would call margins in order to manage those operational risks? That is the very business of the CDL and the Defence Logistics Organisation and the IPTs. You have to make a judgment in those areas with each of these arrangements that we have with industry and it will be different in different circumstances.

Q402 Rachel Squire: Can I move on to the End-to-End Review which recognises that improvements are needed in the approach to contracting. Can you say what improvements you are introducing to your contracting arrangements and how will these compare with best practice arrangements elsewhere?

Air Chief Marshal Sir Malcolm Pledger: Yet again, a component of the Transformation Programme, and if you want a little more detail I can turn to General Raper, is in the first instance we have looked at three components of our procurement arrangements. The first is that we are looking for a much more market facing category management. In the past, in essence each of the IPTs has been a law unto itself in terms of empowerment, it has been able to produce the best value for money acceptable operational risk solution for a particular endeavour. We have not been as successful as we might be perhaps in looking across each of those contributors because they do not stand alone in creating that end effect, therefore we have tried to combine a whole series of these activities with industry so that we can get the market to respond in the best possible way and we have had considerable success in doing that in terms of supplier based optimisation, in terms of collapsing the huge numbers of contracts we let in the past into a smaller number of larger contracts which give you volume leverage. We have moved that on from the information we have had from that endeavour to trying to manage our suppliers much more holistically, and I do not mean just the DLO, I mean the DPA and the DLO as the acquisition community, so we are not sending different messages to those suppliers and getting different outcomes. Also, we are introducing common processes with our sister acquisition organisation, the DPA, in order to make sure this works to best effect across that whole community. Indeed, we are rolling that out across Government as best practice to other departments.

Q403 Rachel Squire: That leads on to ensuring that contracting arrangements do ensure that risk is sensibly transferred and required performance levels are delivered.

Air Chief Marshal Sir Malcolm Pledger: Again, I think we need to understand what we mean by "risk". The operational risk associated with this relationship will always remain with the Armed Forces. What we are recognising is that industry and other potential providers can contribute to a more effective arrangement that mitigates that risk and we can transfer some of the financial risk with what we have been doing in the past to get a more efficient solution from some of those providers - know the marketplace; know what their strengths are - and then deliberately using those areas that are better at managing the component parts of this but with us continuing to integrate them in order to manage that operational risk.

Major General Raper: Perhaps I could differentiate between the two aspects. One thing we are trying to look at with our major partners in industry in relation to some of the major platforms is how might we contract for availability in the future with the appropriate performance regime within that. I would suggest that not only gets at efficiency but crucially that gets at effectiveness, because if you contract for availability for a partner then you are starting to put the onus on to them to drive reliability and ease of maintainability because that is where their future costs lie and that is what they would be clearly wishing to take out, by comparison with a contracting regime whereby industry repairs when something breaks down or provides you with spares. In other words, there is not the incentive to drive reliability and, therefore, effectiveness in the way that we would wish. One aspect is the contracting for availability with partners and the other aspect which the CDL was referring to in terms of what we are doing with procurement reform is very much attacking pure efficiency: how can we be a much, much better buyer in the marketplace and use our economic power to much, much better effect? I am sure you will be familiar with the sorts of ratios that the commercial sector looks at when it is actually looking at buying commodities and the sorts of prices that they are taking out. In terms of procurement reform, which has now been running for about eight months, we are looking at that delivering in the first three or four years something in the order of £400 million of efficiency across and then from 2009 onwards about £410 million year in year out. That has broken up our spend into a set of categories and the first £2 billion of the £5.6 billion that we spend has been analysed and out of that will come another £136 million. That is looking at things like how we spend on travel money, how we spend on transport, how we do some of our IS applications and so on and so forth. One aspect of procurement reform is really trying to get to grips with efficiency and us becoming a much, much better buyer in the marketplace and the other is trying to get industry to deliver under an availability regime where you do start to get the effectiveness that you want to see out of a number of these major platforms.

Q404 Mr Roy: Could I turn to the Defence Aviation Repair Agency and stick on the subject of efficiency and effectiveness. It is my understanding that during the past year £18 million has been spent at St Athan building the new superstructure which I understand is the size of six football pitches. That structure allows for 47 fast jets to be repaired at any one time. With that in mind and the money that has been spent, and also bearing in mind that at the moment 1,450 civilians do the work that it previously took 4,500 RAF personnel to do, what is the military case for the proposed re-nationalisation, because that is what it is, of the modern up-to-date super facility at St Athan?

Air Chief Marshal Sir Malcolm Pledger: I cannot necessarily address the figures that you have used; I would need to understand the origin. I would simply say that the Red Dragon project that you describe was, of course, a business case that delivered a particular outcome in a certain timescale and that will be delivered. That business case stands in its own right and will deliver the benefits associated with it but, because of the End-to-End Review, what we are looking at here is a concept that identifies our future needs in terms of forward and depth. This is not what I would call the original arrangements, this is doing things differently in the future better to manage the operational risks that we face and the dependencies that we face.

Q405 Mr Roy: Is that based on the business case or the military case? Certainly I will expand on the business case but I would like you to tell me about the military case of moving and making all those people unemployed, building an £18 million superstructure and then moving it somewhere that has not got the same track record as where you have just left. What is the military case, first of all?

Air Chief Marshal Sir Malcolm Pledger: I am not sure I understand your question because this is not just a military case, it is a management decision on efficiency and on effectiveness.

Q406 Mr Roy: Tell me, first of all, about the part that is just a military case.

Air Chief Marshal Sir Malcolm Pledger: The part that is a military case is better to be able to support tomorrow's operations by doing things differently.

Q407 Mr Roy: You could not do that at St Athan based on the £18 million you have just spent?

Air Chief Marshal Sir Malcolm Pledger: No, I am not saying that at all. I am simply saying that when we applied that principle of better support and we looked at different ways of achieving it, the investment appraisal showed us that one particular area rolled forward to a single centre of excellence for depth was the right answer and in other areas rolled back into industry or DARA was the right answer. You cannot have one to stand without the other.

Q408 Mr Roy: A military case can still be made for keeping the operations at St Athan.

Air Chief Marshal Sir Malcolm Pledger: I can make what I would call a compelling case to remain at St Athan, but ----

Q409 Mr Roy: Do you have a military case?

Air Chief Marshal Sir Malcolm Pledger: I can make a more compelling case to roll forward elements of this into other locations.

Q410 Mr Roy: Presumably that more compelling case will be based on a military case and a business case?

Air Chief Marshal Sir Malcolm Pledger: As we have said from the beginning, this is both effectiveness in the new challenges we face which has determined we do things from depth and forward, not the four lines that we had in the past, and applying that principle leaves you one centre of excellence in the strategic base. That is what is being created at Marham, for example.

Q411 Mr Roy: On that same theme, still sticking with the business case, I hope you would agree that business has a social responsibility as well. I presume that you do. You have agreed that you do. I live in an area that was devastated at one point by the steel industry and the case was not made. We tried to make an economic case for the work and a social case as well. I think the business case should take care of the social aspects of any of its plans. If that is the case, what thought has been given to the devastating effect that job losses for 1,450 workers will have at St Athan, plus the businesses and families who depend on servicing that sector? Presumably you have thought about that.

Air Chief Marshal Sir Malcolm Pledger: Yes, we have. For example, the trades unions have been involved throughout.

Q412 Mr Roy: And disagreed throughout.

Air Chief Marshal Sir Malcolm Pledger: I am not quite sure that they disagreed with the outcome. They have commented in the consultant period.

Q413 Mr Roy: Surely you are not going to tell me that you perceive the trades unions to be in agreement with the closure of St Athan. Let us get this very clear: are you telling me that the trades unions have not disagreed with the proposed closure of St Athan?

Air Chief Marshal Sir Malcolm Pledger: I am saying they have had the opportunity and made their observations on the business case which deals with the particular element of DARA that lies at St Athan.

Q414 Mr Roy: But they have disagreed.

Air Chief Marshal Sir Malcolm Pledger: They have made observations.

Q415 Mr Roy: They have disagreed. That is sitting on the fence. They have disagreed with the proposed closure. Please do not pigeonhole trades unions by saying that they have agreed to 1,450 redundancies.

Air Chief Marshal Sir Malcolm Pledger: I am not pigeonholing anyone. I am saying that they have been consulted, they were involved throughout, and they have made their observations on what we propose to do. We have taken due note of those and we are actively trying to engage other potential employers to mitigate some of the risks for that workforce.

Q416 Mr Roy: What is the opportunity cost to the MoD of closing St Athan? How much will it cost? How much will they need to reinvest in that area because presumably as a good employer they are not just going to turn their back on their former employees and walk away? There must be an opportunity cost; there must be some money that will have to be spent in that area. How much will that be and does that come into consideration?

Air Chief Marshal Sir Malcolm Pledger: Again, that is part of the investment appraisal. To answer that in any kind of detail, we would have to make available that investment appraisal.

Q417 Mr Roy: Has the appraisal not been done yet?

Air Chief Marshal Sir Malcolm Pledger: Yes, it has been done.

Q418 Mr Roy: So how much is it? If you have done the appraisal, how much will it cost?

Air Chief Marshal Sir Malcolm Pledger: I can only offer to give you a particular number in answer to that question. I do not know it immediately.

Q419 Mr Roy: You will be able to write to the Committee with it?

Air Chief Marshal Sir Malcolm Pledger: Yes.

Q420 Mr Roy: I am very concerned that it used to take three times more people to do the same work as those same men and women are now doing. When did military personnel last undertake the deep repair of aircraft and what experience do RAF personnel at RAF Marham have in undertaking such work on Tornado GR4 aircraft?

Air Chief Marshal Sir Malcolm Pledger: Can I draw your attention to what happened at Cottismore on Harrier where we have already introduced something we call a pulse line lean system using RAF manpower, which has made huge efficiencies in that process. Of course, we have learned from that in the proposals for the business case for what we are going to do at Marham.

Q421 Mr Roy: That does not answer my question. When did military personnel last undertake the deep repair of aircraft and what experience do RAF personnel at RAF Marham, not anywhere else, have in undertaking such work? You are moving jobs from one area to another and you will expect other people to do it, but when you expect other people to do it I would like to know what experience those people have got, not people at other RAF bases.

Air Chief Marshal Sir Malcolm Pledger: You are suggesting that the people at Cottismore never moved from Cottismore.

Q422 Mr Roy: No, I am not saying that.

Air Chief Marshal Sir Malcolm Pledger: I am saying that these military people who have been involved in deep maintenance have the skill sets to complete that, they have just proven it categorically in support to Harrier. We have those skill sets.

Q423 Mr Roy: Let us talk about the people at RAF Marham, not anybody else. Let us try and talk about them. When did they last have experience of working on these aircraft?

Air Chief Marshal Sir Malcolm Pledger: As I say, I do not understand the question because the people at RAF Marham today will not necessarily be the people at RAF Marham tomorrow in order to fulfil the remit for deep maintenance of Tornado.

Q424 Mr Roy: I take it that those people at RAF Marham today have no experience.

Air Chief Marshal Sir Malcolm Pledger: No, I did not say that. We have the skill sets across the Royal Air Force to do this, as we have just proven with the Harrier line at Cottismore.

Q425 Mr Roy: That is okay, but if you are working in St Athan and your job is going to another area, I would look towards those people who are working on that particular base that that work is going to and I would surmise that they would be expected to do the job that I am already doing, not somebody else from RAF Leuchars or anywhere else in the country. You are saying that you are going to take work from one area and put it in another RAF base and the people who are there will be expected to do the work presumably. I am trying to get the balance of the experience. Is it an old boys' network where you are re-nationalising, you are moving the work out of South Wales and you are going to put it into an RAF base somewhere else and expect the same level of competence and experience that you have just given up?

Air Chief Marshal Sir Malcolm Pledger: As I say, we have the skill sets to be able to do that without significant technical risk.

Q426 Mr Roy: How reliant will RAF Marham be on private sector assistance?

Air Chief Marshal Sir Malcolm Pledger: Significantly.

Q427 Mr Roy: Give me the percentage.

Air Chief Marshal Sir Malcolm Pledger: As I said earlier on, we are already dependent in many areas on commercial capability. I said we do much of our work through acquisition, acquisition from both internal and external providers. I am already dependent for two-thirds of my activity on that.

Q428 Mr Roy: If problems are experienced at RAF Marham with the deep repair of Tornado GR4 aircraft, where else could this work be undertaken?

Air Chief Marshal Sir Malcolm Pledger: For Tornado in particular?

Q429 Mr Roy: Yes.

Air Chief Marshal Sir Malcolm Pledger: Well, theoretically I suppose you could look back at the original manufacturer as one option.

Q430 Mr Roy: More expensive?

Air Chief Marshal Sir Malcolm Pledger: You asked me who could do it. I am not saying that we have looked at the options and the costs, you asked me who could do it. I go back to the original ----

Q431 Mr Roy: Why have you not looked at the options and costs?

Air Chief Marshal Sir Malcolm Pledger: We did look at options and costs.

Q432 Mr Roy: Surely you have looked at every single aspect. What happens if RAF Marham does not work and something goes wrong, what is the option?

Air Chief Marshal Sir Malcolm Pledger: As I say, we have looked at the options, we have judged the risk, that is part of the business process and that is part of the investment appraisal. The investment appraisal was done in accordance with Treasury guidelines, it understands risks, it applies factors for risks, those risks will be different whether it at St Athan, at Marham or anywhere else. Those judgments have been drawn in a number and then said the most cost-effective solution to doing things differently in the future against a single depth centre of excellence is at RAF Marham.

Q433 Mr Roy: And the social costs of the closure of the other plant?

Air Chief Marshal Sir Malcolm Pledger: You added those statements and I said I would tell you what the costs in the investment appraisal were associated with that.

Chairman: Sir Malcolm, what is quite irritating for me is that we did an inquiry into the new funding for DARA. It was very controversial and people came and argued why there should be this rather radical change of reorganising DARA and putting additional work into St Athan, a big argument about the role of the MoD and the Development Agency, whether the site was adequate or not. Finally, after a great deal of complicated decision-making, they decided they would put up this enormous hangar which would accommodate the entire diminished Air Force and Army, I suspect, for £18 million. This looks to me like the Grand Old Duke of York who marched everyone all the way over to St Athan and now they are marching out again. It is a bit like Lord Beeching. I recall in South Wales whenever they repaired and painted the railway stations you knew exactly what was going to happen next, they were going to close the line. This is a replication of that. I can understand Frank arguing the case for dislocation of the workforce and possible redundancies, I share that view, but my irritation is what kind of decision-making process is it that you have a major decision in 2001, a major upheaval, a major reorganisation and then three years later it is going marching off in the opposite direction? You have told us how you have improved decision-making and asset tracking. You should spend a bit more time on the asset tracking work being done because it is going to a different part of the country. I find the decision-making process to be totally bizarre, almost a reversal of the decision, when so much effort was made to explain to us why the St Athan decision, the DARA reorganisation, was essential. Now you are coming back, and I must say others will follow behind you in defending this decision, but as far as I am concerned, even though we have a very busy agenda, we did a very quick inquiry into the move in 2001 and I see no reason why we should not do the same for this proposed move. It is the decision-making perspective that I find really difficult to comprehend. I know the MoD is not always keen to show us documentation but we would certainly like to see why this study so quickly after the previous study came out with a totally different solution. I am putting down a marker that we will need a lot more information on this before we are going to be convinced that a reversal of policy is necessary. We will go to my colleague who lives closer to St Athan than I do. I have no fond memories of St Athan, I let in 12 goals in 1961 so I would not do anything to save it, but others have a very different and more passionate view than I do. Dai, from Merthyr.

Q434 Mr Havard: My colleagues have roamed across some of the things that I was going to ask you. Let us take the high level of the argument which the Chairman has just alluded to. Clearly it is perceived by us as being a reversal of policy to some degree because all the declarations, politically, commercially and otherwise, about the establishment of DARA and where it sat in relation to business, where it sat in relation to being a competitive organisation as a trading fund to be able to give depth of support for the MoD to have commercial opportunities, if you like, so you and the RAF, the MoD, the Government is not hooked up to a monopoly situation from the suppliers of the aircraft. All of those big political questions seem to be being distorted by this particular action. The whole idea of this was that military personnel would not be involved in this deep support of aircraft, it would be done elsewhere, and in order to avoid the danger of being hooked up to suppliers there would be an alternative in the market in the form of a Trading Fund. This particular decision seems to have hit at that general direction of policy. There are other decisions that you have been making in the DLO that you would argue are consistent with that political declaration but this one brings that whole issue into question. Maybe it is not a question you can answer but my colleague asked you about the military rationale. My constituents tell me that the real reason for the change is your crisis manning levels and the way you approach them and what you perceive in the RAF to be your need for certain personnel. A direct consequence of that is you will now train these people as aeronautical engineers and keep them employed. One way of doing that is by organising the work for these GR4s in the way you propose. It has nothing to do with all these other questions I raised about where DARA sits in the broader scheme of defence industrial policy or even efficiency in spend, so that money is transferred to the vote - in other words, employing military personnel rather than coming from revenues which DARA might make as a commercial organisation.

Air Chief Marshal Sir Malcolm Pledger: I started by offering that this is transformation in order first of all to create a more effective supply chain. I do not just mean distribution; I mean the whole of the supply chain including repair, overhaul and initial acquisition. We are doing different things in order to show (a) it is more effective but (b) I am afraid I then have to straddle the operational space with the business space because of those dependencies. We are not simply doing what was there before more efficiently. We are challenging the very essence of why doing things in the way we used to is still supporting the effective employment of our armed forces in a way that we can show is value for money. You are right in one essence: that this is a change of policy, but it is a change of policy deliberately against those parameters. We are not simply doing what we did before because it does not give us the right answer to create an effective supply chain for the employment of those armed forces in today's circumstances.

Q435 Mr Havard: From where I sit politically, what I see is the RAF because of its particular perceived needs in this area and crisis manning, in order to do that, it is not taking the advantage that is coming through doing work more efficiently. It is using its particular position as a sort of special pleading almost to retain the work with military personnel rather than using the tools and processes that are available to it for the establishment of DARA.

Air Chief Marshal Sir Malcolm Pledger: I am sorry but again I come back to the investment appraisal that underpins these options. This is the best value for money solution in this particular area.

Q436 Mr Havard: You have mentioned the investment appraisal. You say that the investment appraisal was done for this particular change. What factors were taken into account in doing that and in deciding which option showed the best value for money?

Air Chief Marshal Sir Malcolm Pledger: You create the business case according to the parameters that impact on it. In this case, it is how best to do the activity that in the past was called fourth, third and second line, using the best skill set, using modern, lean techniques that we have proven in other military environments. Then you cost that way of doing business, but you also ----

Q437 Mr Havard: Because the RAF has become smarter at doing that with the Harriers, the circumstances have all changed and there has been a policy revision. Is this to do with the investment appraisal or with policy change?

Major General Raper: I wonder if I could outline a couple of things that came out of the end to end review because that is the piece of work which has covered the principles on which we are placing all of that future support regime. That is irrespective of location or organisation. The end to end review came out with three key findings: we needed to configure for the most likely - and I could give you some examples of what we are doing there - and the second thing is that we should concentrate our resources and material at logistic centres of gravity and therefore, in terms of support for aircraft, that is in the form of having single depth support locations. The third thing was having a reliable supply chain which we have already spoken about. In terms of how we are taking transformation forward, we have clearly taken those three into the transformation programme.

Q438 Mr Havard: This is all mixed in with this medium term work strand discussion, is it?

Major General Raper: Those principles will also play into the medium term work strand, yes.

Q439 Mr Havard: On this particular investment appraisal, is it going to be published? Are we going to see what the relative assessment was and why DARA did not come out top and the RAF did?

Air Chief Marshal Sir Malcolm Pledger: It has not been published. In the consultation period parts of it have been made available to the trade unions.

Q440 Mr Havard: Perhaps we can try to find out whether more information could be given to us because in terms of transparency it would be nice to see it. Who helped in doing the appraisal? Did the National Audit Office, for example, get involved? Who did you use in order to help you do the process of deciding who was the best?

Air Chief Marshal Sir Malcolm Pledger: It was done under the direction of the senior economic adviser in the Ministry of Defence.

Q441 Mr Havard: The National Audit Office were not involved? It was domestically done by the MoD?

Air Chief Marshal Sir Malcolm Pledger: That is absolutely standard practice in accordance with Treasury guidelines for all business cases that we then consider.

Q442 Mr Havard: Can you say anything about what will now happen to the money that has already been invested in the infrastructure in St Athan?

Air Chief Marshal Sir Malcolm Pledger: As far as we are concerned, the benefits that were apportioned to that particular business case for Red Dragon will still be deliverable.

Q443 Mr Havard: We know from discussion elsewhere - maybe it is not a question you can answer - but you will understand the reason why we need to pursue it. We had a letter from the Ministry of Defence yesterday which addressed some of the concerns that the trade unions had raised about some of these things and really it comes to this business about your capacity. Part of the reason we asked the questions about military rationale is three years ago there was a requirement for assured access to repair capabilities and a capacity for surge workloads at a time of crisis. Is there still such a requirement?

Air Chief Marshal Sir Malcolm Pledger: There is currently a review of the needs for that. Surge will obviously be a part of our requirement in building up to some of the contingencies we prepare for.

Q444 Mr Havard: Where will that be met?

Air Chief Marshal Sir Malcolm Pledger: We are going to have to create the means of doing that in that organisation at Marham.

Q445 Mr Havard: St Athan will not be involved in doing anything?

Air Chief Marshal Sir Malcolm Pledger: If St Athan is the means of creating that surge and that is the best way of doing it ----

Q446 Mr Havard: If this element of DARA effectively suffers and goes out of business because it cannot track all the foreign, other commercial and other military work which the work from the RAF is going to provide a core for, you will have to go away and go presumably back to the manufacturers.

Air Chief Marshal Sir Malcolm Pledger: I think you are slightly forgetting that that was an original condition on the formation of DARA anyway. They had to attract external work in order to make this organisation ----

Q447 Mr Havard: They were going to attract further work on the basis of the core work which has now been taken away.

Air Chief Marshal Sir Malcolm Pledger: That core work has been available for a certain length of time already and will continue for another length of time in order to derive the benefits associated with Red Dragon.

Q448 Mr Havard: This letter we had from the Ministry of Defence said, "We accept that there are risks associated with any decision on the options but that the effects on the workforce and hence the impact on costs need to be carefully managed." It addresses the question about the extent to which you might fall inadvertently into a position where you are dependent upon suppliers of the equipment to do things. It says this will not happen. It says to me that the monopoly situation in respect of both the decider and provider functions would be avoided and the means of avoiding it is a very fancy - half of it, it seems to me, has come out of the McKinsey book of boys' own management - management process, which is described here, that is needed in order to establish clear demarcations of responsibility to allow the MoD to manage effectively any monopoly supply of risk. Why is this construct having to be put in place when not too long ago we had a debate about providing a trading fund and set up an organisation called DARA in order to do all these things? What was there seems to be having to be replaced by a new, fancy mechanism which frankly I have very little confidence in, as it is described to me, in order to avoid the very question that DARA was meant to help to address.

Air Chief Marshal Sir Malcolm Pledger: If I may, you answer your own question because this is perceived to be a better solution to the issues that you have just raised.

Q449 Mr Havard: Why is it better? How is it better?

Air Chief Marshal Sir Malcolm Pledger: Because the business case shows how we will do it, how we will manage those risks. If the Minister decides, which of course he has not yet done; he has simply indicated his preferred option, we will manage those risks in the implementation plan.

Q450 Mr Havard: When is he going to make his decision?

Air Chief Marshal Sir Malcolm Pledger: As you know, the consultation phase ended on 27 October and each of the points made in that consultation period had been looked at very carefully before then, offering the Minister advice against his preferred decision. I expect that advice to be available in the very, very near future.

Q451 Mr Havard: I am trying to struggle with the idea of where this particular issue of these particular aircraft and the situation between Marham and St Athan fits with the rest of the whole of DARA, where it fits with the rest of the whole of the logistics, where it fits with the whole thing about your transformation and how that all fits in with what is mysteriously called a medium term work strand, which I am not clear about at all; and how that all fits with whether or not there is a change of policy going on here. If that change of policy is being driven by the operators of the system, as it were, maybe the military, DARA and the agencies, and not by the politicians, then I have a bit of a problem.

Air Chief Marshal Sir Malcolm Pledger: This is not a preconceived outcome and it is not a re-rationalisation in the way that you describe because other aspects of this review have resulted in a roll back. An example of that is that the helicopter community will go back into Fleetlands because that was seen as the most effective and efficient way of conforming with depth and forward requirements in the future.

Mr Havard: You said earlier on this could have been done and could be done at St Athan. You say for whatever reasons it is more efficient and effective, by whatever criteria which I still do not understand. You decided it was more efficient and effective to do it the other way. My colleague has a question about how that decision is effectively the opposite to another decision.

Q452 Mr Roy: I still disagree with you on your renationalisation where jobs in the private sector going into the public sector. That is the same as what used to be nationalisation the other way and I wish we had more of it. The Minister announced on 16 September that concentrating support for rotary aircraft at DARA Fleetlands offers the opportunity to exploit fully the economies of scale that may be achieved by collocating these platforms at a single centre. That seems to be a contradiction to the approach taken with the Tornado GR4 aircraft where support has been concentrated at the main operating base that you have just been trying valiantly to defend. What are the economies of scale from concentrating support at DARA Fleetlands? I am not an expert at all on helicopters but I know you are. My understanding is that the rotary helicopters have different engines, different structures, so where you have aircraft with such differences in the engines, frames and systems, where can you find the economies of scale?

Air Chief Marshal Sir Malcolm Pledger: The reference, as I understand it, is about overheads being apportioned across a larger number of aircraft at that location.

Q453 Mr Roy: Just overheads?

Air Chief Marshal Sir Malcolm Pledger: That is that particular reference. What it does not say seemingly from your quote is that there is also the significant opportunity, because of the nature of those platforms and lean support mechanisms, to take advantage of collocating those platforms at Fleetlands. There is more than one potential benefit in what we are trying to do at DARA Fleetlands.

Q454 Mr Roy: You would accept that there is not an overall economy of scale for repair or whatever?

Air Chief Marshal Sir Malcolm Pledger: We are in danger of what I will call taking one comment out of context and believing it is the only reason for a particular outcome. It is not.

Q455 Mr Roy: The Minister spoke about rotary and the economies of scale and, not being an RAF person, they are all the same.

Air Chief Marshal Sir Malcolm Pledger: They are not all RAF either. For example, the Lynx will go. The Lynx services the army and the navy. Helicopters are currently within the Joint Helicopter Command which is in Land Command.

Q456 Mr Roy: What about the contradiction where you have just been defending moving St Athan where there is a direct contradiction of doing this at Fleetlands? Do you think that is a contradiction?

Major General Raper: No, I do not. We need to come back to the principles I sought to outline and those principles were about reducing the amount we bring forward, creating a single depth, concentrating around a logistic centre of gravity. From the military perspective, those are things we need to look at. There is then the investment appraisal and the business case which will determine where the centre of gravity should be.

Q457 Mr Havard: In one case that depth support, albeit it in one place, has to be done by military personnel and in other cases it does not.

Major General Raper: The number of military that we need is that number which you need to sustain deployed operations and no more. Therefore, that number of people has to be employed.

Q458 Mr Havard: I am not wrong earlier on in talking about a lot of this, as far as the RAF is concerned, is to do with your crisis manning levels and where you keep these boys gainfully employed in the meantime.

Air Chief Marshal Sir Malcolm Pledger: That is one of the elements because our whole purpose in peace is to create readiness.

Q459 Mr Havard: There might be other ways you could do it without disturbing St Athan.

Air Chief Marshal Sir Malcolm Pledger: In the option which was St Athan, which was included in this, we would still have had to employ the right number of military people in this single depth hub.

Q460 Chairman: Those arguments were not very strong in 2001. The Ministry of Defence was saying DARA could do this job; they have the surge capability; they are reliable. I would like to know what has happened in the meantime.

Air Chief Marshal Sir Malcolm Pledger: Because we did not have the same principle that we have been talking about applied. We had four lines of maintenance which required larger numbers of people than we currently expect to use in the two separations.

Q461 Chairman: You are losing 7,000 people from the air force. Have you worked out how, with substantially reduced numbers, a number of these are going to be engaged in the work that is currently being done outside the air force? That is all worked out?

Air Chief Marshal Sir Malcolm Pledger: Many of the numbers, not only in the air force but in the army, as we create a new army liability, come from the efficiencies associated with logistics transformation.

Q462 Mr Roy: Will the investment appraisal and the affordability analysis relating to this decision be published?

Air Chief Marshal Sir Malcolm Pledger: I do not know.

Q463 Mr Havard: I asked you whether the other one was going to be published. The reason I asked you that question is very simple. These two are different. They almost seem inimical to one another. What we need to understand is what has gone into each of those appraisals and why it may be different or the same and how they inter-relate. If we do not have that information, it is very difficult for you to be able to convince me that individually they were correct to do and they are complementary to one another as opposed to contradictory to one another. That may be something you cannot commit to do today but I think it is ridiculous for anyone's understanding of what is going on here if we do not have that sort of information to get that level of understanding.

Air Chief Marshal Sir Malcolm Pledger: I hear the question and I will write to you.

Q464 Rachel Squire: Future Capabilities sets out a number of changes to army equipment including a reduction in Challenger 2 squadrons, AS90 batteries, Rapier anti-aircraft launchers and high velocity missile fire units. What assessment has been made of the impact of these equipment reductions on ABRO, specifically in terms of future workload?

Major General Raper: Some of that has been done specifically in relation to the full structure changes which you have mentioned. I would suggest that the bigger change to ABRO comes from putting in place exactly the same principles as we are doing on the air side and in particular putting in place lean operations within ABRO, which is exactly the work that we are doing with the chief executive at the moment. Indeed, if we look at the work that we have done at Donnington to improve the processes and the output at Donnington, that has released some 45 Warrior back to the field army, simply by improving the processes between the in part and the out part. The level of the workforce clearly will be governed by the amount of work and how that work is done.

Q465 Rachel Squire: Can I ask you to say whether there is sufficient funding to repair all the armoured vehicles such as Warrior which have suffered damage in Iraq? You are looking puzzled.

Major General Raper: I am just intrigued by the question. The answer to that is yes, for those that can clearly be repaired. It depends entirely on the state of the vehicle.

Q466 Rachel Squire: That is a very vague and general statement.

Major General Raper: The specific is yes. The amount of work that is required if it can be done is dictated by the state of the vehicle and in particular the state of the armoured hull.

Q467 Rachel Squire: I remember myself and other Members of the Committee visiting one of the ABRO sites and hearing about its operations and the real effort and progress that had been made. A crucial role is repairing damaged equipment and getting it back to the men and women on the ground as soon as possible.

Major General Raper: Irrespective of how that damage has been caused and therefore, if you have had the privilege of seeing the in part of some ABRO facilities, you will know the state of some of that equipment that has been involved in traffic accidents, accidents on exercises, and it does require a substantial amount of work. You do need some integrity of the armoured hull to be able to repair everything else around it.

Air Chief Marshal Sir Malcolm Pledger: There seems to be an implication here that the ground forces will be short of these major equipments because of damage. We are using the whole fleet to support these endeavours and we have to create an efficient repair and overhaul arrangement to deal with the damage, but it is not the same vehicles that will replace the ones after their repair until they have gone through that cycle. I do not think there is any danger that we will not have enough Warrior in the operation because they come from the whole fleet.

Major General Wood: And an ongoing up-marketing programme to improve their protection and survivability in theatre, issuing more items to improve their protection for that particular vehicle.

Q468 Rachel Squire: It is the connection if you like because apparently there are reductions planned in equipment. Will that still mean that you can get out to our armed forces the equipment they need? There is also the issue that ABRO has ten sites and there appears to be discussion about some of those sites might be closed and some of the current manpower might be reduced which immediately, given that we were just talking obviously about RAF St Athan, the heart of it for many of us is ensuring that the equipment gets out to our forces when they need it and in the best possible condition; but that those who have undergone major changes and efforts on the ground, particularly back in this country, are also recognised in terms of what they have delivered and will continue to deliver to our armed forces. Yet there are all these constant reviews being done about how further cuts can be made in equipment, sites and staff. I get totally flummoxed by how much we can spend so much time and money at senior level employing endless consultants on doing constant reviews to deliver value for money, where for me and many others the real priority is what is happening on the ground at ABRO, RAF St Athan and elsewhere.

Air Chief Marshal Sir Malcolm Pledger: There is absolutely nothing but praise and recognition for what these people have achieved. At the same time, we must note, for example, that through process improvement we have put another 45 Warriors back into the front line. That has implications for the number of people that we need to employ then to maintain them. That is a reality and I am afraid it is my task to make this thing as efficient and effective as it can be and manage the consequences that creates. You talk about reductions of equipment. Those reductions are a rebalancing as well. In future army structures, we are looking for a much more balanced force against what General Raper described are the most likely. Those will be a lighter, more balanced, more agile force into the future. This, I am afraid, is a different requirement for tomorrow and maintaining the arrangements of yesterday cannot be the right answer to creating an effective supply chain.

Q469 Rachel Squire: Can you say whether the recommendations of the end to end review will affect ABRO in the long term?

Air Chief Marshal Sir Malcolm Pledger: I do not think it is in doubt at all. They must as we apply those principles.

Major General Raper: They will certainly impact on ABRO as ABRO puts in place lean process. That is exactly what has happened in looking at ABRO Donnington. The same will happen looking at ABRO at Bovington. As those facilities become leaner, if the amount of work that needs to go through there is also reducing and they are doing it more efficiently, by definition the overall volume reduces.

Air Chief Marshal Sir Malcolm Pledger: In the same way as you were asking about how we become better buyers of services in the future, we are becoming better buyers of the product from ABRO as well as from commercial sources.

Q470 Chairman: I can see that you think these guys on the Defence Committee are opposed to any radical change. I am going about creating a better system and they are being quite difficult. I hope you appreciate that, as I have been in my job longer than you have, it gets frustrating when you find such radical changes three years after the MoD come down and plead with us to accept why we have to go down the direction or support the direction that they are supporting. Then the guy running it disappears. You come along with a new approach and yet we can sit back and see it in the long term - i.e., over a three or four year period. Frankly, it looks ridiculous. Maybe you are right now. I have sufficient confidence in you that you are right but who thought about that plan three years ago that resulted in you, because there was a war and lessons to be learned, very largely going in a different direction. That is what frustrates us. It is not that we are opposed to change. We just like to see change proceeded with in a more rational process than we are exposed to at the present time. That is why we are a little irritated as well as yourself. In our Lessons of Iraq report, we concluded, "We are in no doubt that one of the key lessons to emerge from Operation Telic concerns operational, logistic support and specifically the requirement for a robust system to track equipment and stocks both into and within theatre, a requirement which was identified in the 1991 Gulf War. The lack of such a system on Operation Telic resulted in numerous problems ..." etc. We had Sir Kevin Tebbit talking to us on 15 September on logistics and asset tracking. We said that one of the key lessons was the need for better asset tracking. You have told us, "Yes, we had a system but in the situation the military found itself it was not quite up to it." The government told us, "A package of improvements for logistics material management has been identified which includes tracking. This package would require funding and options will need to be considered as part of the Department's planning round against other priorities. If funded, the enhancements will provide a robust tracking capability." I know we have touched upon it and Mr Ottaway mentioned the point. What is the outcome of this consideration and has the required funding been made available? If so, how much?

Air Chief Marshal Sir Malcolm Pledger: Can I ask General Wood to deal with the outcome and the funding arrangements? You also said to me at that last meeting that you would not wish me, on my next appearance, to say that we had not been able to improve that regime. I would claim categorically at the moment that already we have improved that regime in what I called earlier the sustainment phase of that particular operation. I gave you examples of what we have been able to do. I would like to reinforce that the answer to this question is not just asset tracking. It is very definitely about asset management because it is no good seeing what is happening out there if you cannot intervene and make it right. Just a plea from me: even if we have the best asset tracking regime in the world, you may not still gain that confidence in the end user because you cannot manage the information in the appropriate way. General Wood will describe the various components of what we are doing in future, recognising that we are patching current systems that have already given us visibility and greater confidence from the end user in the way we have described.

Major General Wood: The lesson was recognised. Funding was approved, not huge sums of money because the CDL was saying we were building on the existing capability to make it better. A total of £20 million, just under, was approved for this family of projects. I am sure when General Jackson appeared before this Committee he would have apologised for using what he described as "alphabet soup" and I shall probably apply the same apology. This is a combination of the management of material in transit, the management of the joint deployed inventory and consignment visibility. Then you have the base inventory systems. It is all of that together in which we are trying to make improvements. All that family of projects have been drawn together into a programme and they are going to an assessment phase now. We will go before the Approvals Board in the autumn of next year to see those enhancements in a coordinated way delivered in the following year; but, as the CDL said, we are making progress now to improve capability building on what we already have, which is the reference I made earlier in the area, for example, of consignment visibility to a further version release of that system which is known as Vital. Another system release is planned in the new year and a third one after that in order to improve the database on which it is founded. I made reference to its user unfriendliness in the past. The management of material in transit is a bridging capability on top of that existing consignment visibility capability, not to just wait for the September 2005 approval process but for this demand tracking system which was already available being incorporated now. The roll out for that is early next year. Then, for the joint deployed inventory, MJDI, again it is part of that submission for autumn next year but I made reference to the trial in the land environment which has demonstrated that the existing capability will serve land process requirements and therefore we will incorporate that. That is not the same as me saying that is the solution; nor am I saying that is the solution for ever, but there is a real capability there which we are taking, enhancing and using now. There is also the management of fleets and whole fleet management. The CDL made reference to the distinction between just tracking an item and the configuration of an item. What is known as JAMES, Joint Asset Management and Engineering Solution, the first stage of that, will roll out next year which gives us fleet management capability. It is the sum of all those parts in this programme that I would say is a demonstration of the improvements which are being made now and into the near term.

Air Chief Marshal Sir Malcolm Pledger: The visibility of all that is within the total programme overseen by General Raper. The development of this and the milestones and the deliverables are there for everybody to see in the right timescales on the defence net. This is not hidden. We are showing exactly what we are doing, when the benefits will be delivered and apportioned to which of the programmes. I can guarantee you more transparency into the future as you see the progress against each of these and I think there are other aspects of this in process terms. For example, we are introducing PEPs, Priming Equipment Packs, that again will enable this system to work more efficiently and allow us to manage it.

Major General Raper: I could mention something about PEPs which is directly related to this and one of the lessons from Telic. If you recall, there were a number of challenges at the beginning in getting units up to the right level and making sure the equipment was at the right level. One of the things therefore we have already trialled with one of the battalions and will look to trial at brigade level next year with a view to operational deployment from 2006 onwards within the army is being done on a PEP basis. A PEP is a Primary Equipment Pack which means all of the scales, support and spares that that unit would require would be delivered to it when it is warned for operations. That will ensure that that unit maximises the time it has available in getting ready, not as it has done in the past in terms of getting together all the equipment it needs because that will be delivered to it. That should therefore improve the availability of the equipment that it deploys with. It will also prevent quite a lot of the demands that there have been on the supply chain in the early stages as people try to make sure they have all the things that they require. That is one thing that we are putting in, in direct response to those lessons which will also help with readiness.

Q471 Chairman: Will the quartermasters be trained not to plunder like Gengis Khan's hordes because we visited Umm Qasr and it appeared to be semi-anarchic. When the material was coming in, the quartermasters were grabbing all they could. It was not signed for. They were taking twice as much as they required and it was rather embarrassing. You think in a crisis like they went through, a new system if it was properly operational would bring rationality in?

Air Chief Marshal Sir Malcolm Pledger: We honestly believe it will create the confidence in those quartermasters that changes their behaviour as a consequence.

Q472 Chairman: I hope that is how they behave.

Major General Wood: Quartermasters are trained at the Defence College of Logistics and there is a training piece to this in terms of making people more familiar with the systems that I have just described so that they are comfortable with their use.

Q473 Chairman: They are professional scavengers but they do not have much concern for anybody else. If much of this is going to be computerised, will it be properly secure, because we do not want a potential adversary making things more confusing than otherwise they would be? Within your £20 million upgrading, you can give us some guarantee that it will be a secure system?

Air Chief Marshal Sir Malcolm Pledger: I am not sure I want to be constrained to that £20 million upgrade because one of the keys to this is the bearer systems on which these will sit.

I think you are already aware of the MoD's emphasis on DOAI signal infrastructure and the introduction of Bowman will also help as a potential carrier. It is not just the systems; it is the electric string between those systems that we need to make sure is appropriate to the task of security.

Q474 Chairman: I hope we can be reassured. When you spoke, you used the word "patching" and this looks like a good old British compromise. We cannot afford it; we do not have the money to have a proper system so the best way, the way in which the British do best in a situation, is to get the best of what we have to try to make it work. Try and reassure us, if not now then in writing if you do not mind, that this patching approach will deliver a proper system and that you have considered other options, including getting the best available. I presume this will not be the best available if you are merely restructuring and improving upon what you have already. Perhaps you can drop us a note on that.

Air Chief Marshal Sir Malcolm Pledger: We will do that.

Major General Wood: We are building on existing capability. As we go through each stage in the approval process, we ask very demanding questions about what alternative capabilities were available and in existence within the defence community and outside. That is part of the examination process we would expect to go through.

Q475 Mr Havard: Obviously, the stuff gets in; then it is the breakout and then the management of the assets and the recovery. None of these is an easy thing to do with quantities and all the rest of it. You talked about Vital. Echoing the chairman's question, am I correct in understanding that you are not going to try and invent a new computer system to deal with this? It is going to be consistent across everything - otherwise, we will go to hell in a handcart. As I understand it, the existing systems in the front end can be modified and made better but the back systems that each of the services previously had which were not consistent, some sort of middle way process is being applied to help to do that. Is that correct?

Air Chief Marshal Sir Malcolm Pledger: That is correct.

Q476 Mr Havard: We are not going to have another monster computer debacle?

Air Chief Marshal Sir Malcolm Pledger: No.

Major General Wood: The context is set within the supply chain blueprint so there is a doctrinal context for this. It is not just a series of little projects. There is a programme and it is in the broader context of the end to end supply chain.

Air Chief Marshal Sir Malcolm Pledger: We have had to do this at best pace as well. There has to be some manipulation of current systems as the right way of doing that in the intervening period.

Q477 Mr Havard: The trials, you said, were on land. The problem comes to some degree at the literal end so there is a particular set of issues there from Op Telic, is there not, where the marines were giving the army boys petrol or diesel?

Air Chief Marshal Sir Malcolm Pledger: There are different issues in the different environments but by far the most complex issues to solve are in the land environment because of its mobility and reasonable habit of moving the goalposts in terms of where it needs delivery.

Q478 Chairman: The system will be perfectly compatible with the Americans, French, Germans and any other allies that come along with us?

Major General Wood: You will have been briefed before about TAV Minus which we use. I received some funding to retain that as a UOR. We have extended the footprint for that and we have been involved in some NATO trials using TAV Minus.

Q479 Chairman: You realise I said that with very high irony?

Air Chief Marshal Sir Malcolm Pledger: We have explained all this to the NATO Military Committee who were very interested therefore in how they could engage with what we are embarked upon in order to try to get that interoperability within those nations as well.

Chairman: I am sure there are many French companies masquerading as British companies who will be more than capable of supplying any system you require. They might even supply it to their own armed forces, which I very much doubt.

Q480 Mr Havard: The NAO report which has come out recently talked about the defence logistics transformation programme, the benefits from that of some £2.1 billion over the years 2007-2008. Which major areas are these savings coming from? How are they going to be reinvested in the DLO process, or are they going to be invested somewhere else?

Major General Raper: I was not clear which report you were referring to.

Q481 Mr Havard: The National Audit Office report recently said that the savings coming from the defence logistics transformation will be £2.1 billion over a period. If you are making those degrees of savings from your transformation process, how are you going to use them? Which areas are they coming from? Which areas are they going to be reinvested back into or are they going to be stolen by somebody else?

Major General Raper: I would not dream of talking about the stealing part. If we look at 2007/8, we have to remember that is the sum of a lot of work that started several years ago. That also takes account of everything we were doing with the DLO change programme. The DLO change programme, you will recall, had a strategic goal which was the 1.262 billion, or the balance of it as 1.262 billion, by 31 March 2006. If you add on the amount that has already been delivered against that, that takes you up to about 1.8 billion. The end to end review also identified further efficiencies on top of those that had been taken inside the DLO change programme because the DLO change programme specifically looked at things which the DLO budgetary area, rather than the end to end programme which has clearly taken account of those aspects of logistics which are within the front line commands and the services.

Q482 Mr Havard: I misled you and everybody else. It was the MoD efficiency review.

Major General Wood: I think it is the efficiency review that you are referring to. The issue as far as I am concerned becomes a reporting one because if all of the work we have put into the programme delivers it will met the various targets that have been set for us both internally and externally. The first of those was the strategic goal. The second are those efficiencies from the end to end review which is a further 370 million of efficiency by 2008 and a further 110 million of efficiency by 2011 on top of that. Those are the two numbers which go together to give you your two billion. The efficiency review merely takes account of all of that, which is what we have to report to, back through the efficiency regime.

Q483 Mr Havard: Some of this spend is used to do some of the things that we heard about earlier on?

Major General Wood: Some of that is reinvested to improve process within the DLO. The remainder is taken account of in terms of the Department allocating its resources across the piece. Life in the logistic area will not get easier.

Q484 Mr Hancock: Cheaper?

Air Chief Marshal Sir Malcolm Pledger: More efficient.

Q485 Mr Havard: One of the things that immediately came out of our Lessons of Iraq report was the use of urgent operational requirements, particularly in the medical area but in a number of areas. It was a case of having to be done because it had to be done. It raises this difficult question of whether or not we should have stocks. You talk about business space and how it relates to the battle space and whether you have the bridge because you cannot go down to Tesco and buy one. How much of these expected savings will be used to help you to have sufficient stock in these critical areas so that we do not have to have this URO requirement operating in the same way in any future situation?

Air Chief Marshal Sir Malcolm Pledger: There are two questions there. The UOR is the means of managing areas because deliberately we cannot provide for every eventuality. The way to do this is to do the scenarios, understand the costs in stock, equipment and commodities of each of those scenarios and then create the core out of that for the most likely. General Raper talked earlier about one of the principles we are developing which is: be ready for the most likely and adjust for the less likely. We will never be able to afford everything for every potential contingent operation. I cannot promise you a future without UORs but I think I can promise you a future where we understand what risks we are going to have to manage in that warning period, because we have identified the stocks we need -- you heard earlier about the Primary Equipment Packs - so that these are available to the units at an appropriate readiness. We have identified what they are and will provide for them. Through this process, we are able to apply the resources we are given to those areas that will define readiness and sustain that readiness in these particular operations and manage the excursions from the most likely.

Major General Raper: The vast bulk of the efficiencies that we will deliver through the programme in much the same way as when the DLO was set up were to invest in other areas of defence, not specifically within the DLO. We were looking to make the logistic area not only more effective but significantly more efficient.

Q486 Mr Havard: I have asked this question before and I am becoming a bit of an anorak on this, but the resource account budgeting - it is this question of the Treasury rules and the view, not just within the MoD and other parts of the MoD, about if you keep stocks stocks are expensive. They are dead money on the shelf. The bean counters will tell you that is not an efficient way to run a business. If you are Tesco, it is much easier to deal with this issue because you are shifting the beans off the shelf. You have to have these bridges sat there for all time. The way in which assets are dealt with and the relative rules and mechanisms and then people say, "You have saved a bit of money. Thank you very much" and we have the general cock ups whereas you might think, "We have saved a bit of money over here. We can help ourselves with the penalty we are experiencing on the accounting rules for having to keep these stocks." We are trying to get a bit behind the idea of, if there is your organisation, quite clearly you are making inroads and you are running it more efficiently in a number of ways. Why should you have the disbenefit of losing those efficiencies and not have the benefit of being able to use them properly within our own outfit to make it even better? I am not necessarily your enemy in this regard.

Air Chief Marshal Sir Malcolm Pledger: Logistics are not products in their own right. We have to take a corporate view of the best means of using the resources that the MoD has. In some instances, that will result in reinvestment in logistics, but it has to be a deliberate, corporate view as to where the resource is best used having delivered the efficiency.

Q487 Mr Havard: You think all these mechanisms that apply and all the rules and all the processes to decide these sorts of issues are not constructed in a way that is hindering you. That is a leading question but are the rules that the Treasury apply misunderstanding the situation vis a vis the Ministry of Defence as opposed to other organisations that have different requirements and do not have to keep stocks in the same way?

Air Chief Marshal Sir Malcolm Pledger: I do not think that is right because if we understand our business we should be applying the right resource totals in their various categories to our need. If it is decided that, for whatever reason, we will take the risk over here corporately, at least we will know what that risk is in future and be able to manage it.

Q488 Mr Havard: Perhaps at some point you would give us a better overview of the general thing about where the savings came from, how they were deployed and investment policy, something that gives us some confidence in the development of things in the way you describe them.

Air Chief Marshal Sir Malcolm Pledger: We can certainly do that.

Q489 Mr Hancock: You talked about the corporate approach and I am interested in the MoD efficiency note which suggests you could make 2.1 billion saving. That is a pretty big target to have to meet. How much of an input did you have in setting that target? You have been in the post two years. How will we be able to judge whether or not you have achieved that? Is it not something that we talked about earlier, a repercussion, and you have been set a very big target to have to deliver overall from your operational part of that decision?

Air Chief Marshal Sir Malcolm Pledger: There is nothing new in terms of estimate within that particular number. These are all the products of our incremental improvement to our processes identified either in the original strategic goal and the means of delivering it, in the end to end study and in future efficiency means. There is no wedge, if you like, in these numbers.

Q490 Mr Hancock: When does the transformation programme end and you then become another entity? What is the process after the transformation? You save 2.1 billion during the transformation programme. What do we expect following on from that?

Air Chief Marshal Sir Malcolm Pledger: The transformation is both about effectiveness and efficiency.

Q491 Mr Hancock: Is that time limited?

Air Chief Marshal Sir Malcolm Pledger: Once we have the product which is an effective supply chain, we would then want to return to normal, efficiency programmes.

Q492 Mr Hancock: Is that something you will know when you have found it? You will say, "This is now the optimum supply chain; the transformation programme ceases now"?

Air Chief Marshal Sir Malcolm Pledger: According to the capabilities paper, we are talking about 2008 as our target.

Major General Raper: The efficiency targets all come with dates. It is pounds and dates and therefore we clearly have to report against those. We have a benefits tracking system where all of those efficiencies are logged on by the delivery budget areas. That has been looked at by our own internal audit people and the Treasury. That is the mechanism that we use which is open in terms of tracking the delivery of those efficiencies. In terms of the delivery of the effectiveness and the supply chain, for example, we have done work on the blueprint which will have the programme to deliver that effectiveness. Most of that we would expect to see in place over the next three years. How long will the transformation programme be in place? I would like to think that in four or five years we will not be referring to the transformation programme any more because it will deliver the key elements of it and that will now become something akin to routine, continuous improvement. In other words, all the big things inside the transformation programme.

Q493 Mr Hancock: With your experience of being in the post now for two years, having this transformation programme in front of you, do you foresee a merger between the DLO and the DPA, given that on your website you acknowledge that the current system does not work very well and there are problems and that collocation is going ultimately to lead surely to that?

Air Chief Marshal Sir Malcolm Pledger: In terms of an organisational merger, no, I do not see that as a necessity or even a valuable outcome.

Q494 Mr Hancock: Would it help?

Air Chief Marshal Sir Malcolm Pledger: What helps enormously is this process designator, to understand that this is an end to end activity that different organisations have to contribute to. Even if we were to put the DPA and the DLO together, you would still not have an end to end arrangement because half of logistic activity currently goes on in the front line. It does not make any sense to me to look at this organisationally. We have to corral those organisations so that they are contributing to an integrated outcome and their contributions are not fracturing that total arrangement.

Q495 Mr Hancock: If on your own website you admit that the current set-up does prevent you achieving an effective, through life management options, is there any serious consideration being given to the idea of the merging of the two operations? Would that not in the end allow you to achieve what you say yourself you cannot achieve at the present time?

Air Chief Marshal Sir Malcolm Pledger: No. What the website also goes on to say is how we are improving and making the same processes across the acquisition community, because that is where the value lies, not in putting two organisations together when they are dealing in different parts of the through life spectrum.

Q496 Mr Hancock: In the MoD's annual report for 2003/4 they say that a new DLO structure is being introduced progressively from 2005. When do you expect that restructuring to be completed? When do you believe the overall effectiveness of that operation will start to be felt by the three services?

Air Chief Marshal Sir Malcolm Pledger: We have already started. This will not be a big bang, one day the old DLO, the next day a new DLO. We already have introduced what we call the domain two starts which are now the single contact with our main front line commands. I can speak for my customers and say they much appreciate that and have seen the added value that comes from it. That has broken one of the barriers in the past which were based on historical arrangements. We are some way towards creating a new series of enablers in common with that sister acquisition community called the DPA. We are currently going through consultation for that series of enablers with the trade unions, which will reveal not only the new structure but also the post mapping for the people within that structure. We are hoping to roll that out by the end of this financial year.

Q497 Mr Hancock: The restructuring is expected to result in some 3,000 job losses. I would be interested to know how you are planning to manage that scale of job losses and over what timescale do you envisage that will have to happen?

Air Chief Marshal Sir Malcolm Pledger: We envisage up to 950 posts - I stress "posts"; not necessarily people - this year and up to another 2,000 by 2008.

Q498 Mr Hancock: What sort of consultation are you having with your current civilian workforce to ensure that that is handled?

Air Chief Marshal Sir Malcolm Pledger: A huge effort. There are advantages and disadvantages in this. We have been determined from the time we started to consult with the workforce directly as we develop ideas so that they can understand what it means for them. We are not waiting until we have discovered what the outcome is. That has been going on for two years. We have also been doing that systematically with the trade unions throughout that period. I can report to you that the trade unions have found that hugely helpful in understanding the outcome and how therefore they can contribute to an efficient and effective supply chain.

Q499 Mr Hancock: You are knocking 3,000 posts out of the system. Are you satisfied that the work that has been done already on planning for that, the service you provide, is not going to be diminished by that fairly heavily?

Air Chief Marshal Sir Malcolm Pledger: I am absolutely confident and it comes back to: this is not doing the same things with fewer people; it is understanding exactly what we are responsible for and complementing it against those roles and responsibilities.

Q500 Chairman: There are a couple of questions we were going to ask but we will write to you. We were going to ask a question on the clothing contract given by the MoD to a company called Cooneen Watts & Stone. Now they have changed their name to Kowloon Watts & Stone, I think.

Major General Wood: Your adviser had a note on that yesterday.

Chairman: We have a letter from the Minister and we will study it and write back to you with the last couple of questions. Thank you very much. If this is to be your last appearance before us, I will regret that. Thank you very much for the appearances you have made. You were a little bit irritated in some of the early stages but that is part of appearing before us. If everybody smiles after a meeting with us, we have not done our job properly. All the very best in whatever you wish to do or you are asked to do and thank you very much, gentlemen, for coming here this morning.