Select Committee on Defence Written Evidence


Memorandum from Prospect

  This submission is on behalf of Prospect, PCS and TGWU to the Defence Committee inquiry into the Future Capabilities White Paper. I understand that the session on 17 November will focus upon the End-to-End (E2E) review and other logistics issues. If we can offer an insight into the wider logistics review we would be pleased to do so, but in the time available we are concentrating upon DARA. You will appreciate that the trade unions have recently been consulted upon the preferred MoD option arising out of Recommendation 40 of the E2E study and our response to that is also attached. We await further dialogue with MoD in that respect.

  In order for the trade unions to have an early influence upon Ministerial consideration of the E2E Air environment issues we received in confidence the R40 investment appraisal (IA). We made a detailed submission in May on that IA and the main factors we identified are set out below. However the MoD response from Min AF of 9 June, sought to counter a number of our concerns and the Defence Committee may wish to have that information available to place into context the full exchange.

IA METHODOLOGY

  We questioned the suitability of an incremental approach to the IA calculations as it excluded certain costs regarded as common from its evaluation of the different options for the Air depth work; roll forward (to Main Operating Bases (MOBs)) roll back (to DARA) or a hybrid (some platforms to go forward and some to be retained at DARA).

  In various passages the IA admitted to considerable difficulty in measuring the extent of the depth activity, for example in paragraph 47, it noted that "much of the data contributed has been classified as ROM, more time would have enabled better quality data in some areas, but in aggregate the data is reasonably accurate". We questioned whether MoD really wanted to make a critical strategic decision on data that is "reasonably accurate"?

COMPARISONS OF STAFF EFFICIENCY

  In all of the scenarios considered the Crisis Manning Requirement (CMR) dominated the calculations and impacted directly upon the size of the civilian workforce. MoD has reviewed the CMR calculations and recently provided the trade unions with the outcome of the evaluation that we are considering. However, it is self evident that the CMR review was critical to the future of the Air environment because if the numbers were unrealistic, MoD will eradicate directly employed civilian capacity without justification and will have to rely upon expensive contractors.

  The crux of the issue, was the assertion in the IA that "a combination of similar leaning activity and combining upgrade modification work with scheduled maintenance—the IPT-BAES partnered Capability Maintenance Upgrade project—should allow GR4 MOBs, with their current staff, to produce the equivalent of over 500,000 task hours, and points to a required efficiency improvement of over 80% under the Roll Forward option. If this efficiency were not realised, more civilian staff than the 48 included in the IA would need to be recruited".

  We questioned how MoD could approach the prospect of achieving an 80% efficiency improvement with any confidence? In our opinion the CMR was either under utilised at present or addition of the Tornado depth work to their existing responsibilities will cause overload and threaten the delivery of front line activity. As the CMR has to exist for operational reasons, drive for change must be more difficult to apply, as shortfalls will be made up through contractors. MoD answered this concern in their response but as you will see from our further submission we continue to believe this is a major risk factor in the prospective roll forward of Tornado GR4.

COMPARISONS OF CAPABILITY

  We concentrated upon Tornado GR4 as it had the greatest task hour affect, as the F3 service lifetime impacted upon workload in any case. However, we did comment upon the DARA fixed wing capability as a whole.

  Paragraph 41 of the IA stated that "In the Roll Forward option there are considerable costs for technical infrastructure at . . . RAF Stns Marham and Leuchars". Paragraph 27 states "it has been difficult to establish some costs, particularly infrastructure costs and task hours. Contributors were asked to provide three point estimates but this was generally not done . . . accordingly, the figures represent the team's best estimates". Therefore the IA team struggled to assess the infrastructure consequences.

  The assessment of Main Operating Bases (MOBs) capacity must be set against the proven track record of DARA in respect of engineering assets, workforce intellectual property and the investment in enterprise resource planning, that provides coherence to the technical process. DARA can demonstrate efficiency improvements through task hour reductions and aircraft turnaround times.

  We asked how MOBs compared with these DARA attributes, without significant investment and replication of facilities already available to MoD through DARA? Our evidence is that the facilities at Marham will require substantial upgrade.

FLYING TIME

  At paragraph 43 e. the IA stated that "the Tornado flying time between MOBs and Depth under the Roll Back and Hybrid options is significant (£13 million and £3 million respectively)". Our understanding is that it is partial to argue as per paragraph 25, that "the Tornado IPT did not consider the additional flying time to have training value. Because they would fly alone and without attachments such as armaments, flares and fuel tanks, this would limit the opportunity to train. The net costs of the additional flying have therefore been included."

  As pilots have to maintain their flying hours commitment, passage between locations has value in that respect. The vast majority of over flying is undertaken by unarmed aircraft, as there are specific facilities for firing ranges and trials to test weapon deployment. This is because air carriage of weapons reduces their service life through fatigue and other constraints. Moreover, flying time between both Marham and Lossiemouth should also have been factored in for roll forward.

RED DRAGON

  It was not overstating matters to say that all options, with the associated CMR, had a major adverse impact on DARA St Athan. This means that MoD will face not only the redundancy costs, but also the loss of efficiencies associated with Red Dragon and ultimately the cost of breaking the lease at the site. In roll forward and hybrid the payback would also be elongated. We were surprised that paragraph 35 of the IA stated "no costs in relation to the closure of the FOU have been included in the IA". We argued that even a rough estimate would put the redundancy and break costs in excess of £100 million. We also questioned the treatment in paragraph 32 of break costs as a "sunk cost," given that they are only incurred if roll forward or hybrid options are selected. We argued these costs needed to be factored in rather than excluded?

  DARA customers would also face increasing costs as any rundown through roll forward proceeds. As Tornado roll forward could take up to four years to complete, in that time DARA will see the best staff leave and the programme of redundancy inevitably impact staff attitudes to productivity. The removal of work impacts cost recovery and overhead absorption, hence the need to charge higher prices.

  These costs say nothing about the effect upon the South Wales community and relations with stakeholders such as the Welsh Development Agency. The fanfare associated with the build of the Hangar, will be nothing by comparison to the reaction to its demise.

RELATIONS WITH BAE SYSTEMS

  We acknowledged that there needs to be a fluent working relationship with BAE Systems given their status as Design Authority. But in a separate process dealing with a "joint" Integrated Project Team for Tornado, when placed into the context of E2E roll forward to MOBs, led us to question whether MoD risked putting itself into a monopoly situation in respect of both the "decider" and provider" functions. We understand that the joint IPT is predicated on embedding BAE capability, to the extent that the company will be intimately involved in decider issues. BAE will also then deliver the provider function, as prime contractor for the work at MOBs and be available to offer labour if/when there is a CMR efficiency shortfall. We asked whether MoD was comfortable with this, as it suggested to the trade unions that the capacity to benchmark delivery will be severely eroded? These are exactly the risk issues we highlighted in a report last year and we returned to this issue in our further submission below.

AIR ENVIRONMENT STRATEGY AND TRADING FUNDS

  In our response upon the earlier proposals to the roll forward of Harrier work, we said that "DARA was established to provide a cost effective means of comparison with industry, a strategy endorsed by McKinsey and further DLO work on Agency status. The roll forward of Harrier work begins to unravel that strategic purpose". The MoD preferred option involves the roll forward of Tornado GR4 and this has a major impact upon the future of St Athan. Whilst this is partly mitigated by the roll back of Rotary work to DARA Fleetlands, the Agency still faces an uncertain future and is the subject of another review due to report in December 2004.

  In the context of the wider Defence Change Programme the treatment of DARA has sent the message to civilian staff that regardless of whether they meet every challenge put in front of them, their future is insecure. It has strained our preparedness to cooperate in change.

  Therefore MoD faces difficult decisions with long lasting impact.

Mike Clancy

National Secretary





 
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