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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