Select Committee on Defence Third Report


DARA's performance

81. Mr Stephen Hill, the first Chief Executive of DARA, told us that MoD's rationale for turning MoD into a trading fund in 2001was very clear:

82. Mr Hill told us that the first year or so of DARA's existance was spent in preparing DARA for its changed status to a trading fund, the end state of which was only reached after many hard decisions and a great deal of upheaval:

    we significantly reshaped the business. We inherited very large estates which were under-utilised, had too many buildings and many of the buildings were in a very poor condition. So we set about forming what we termed centres of excellence: we had two major engine facilities which we rationalised into one at Fleetlands; we had three avionics centres which we rationalised into one at Sealand, and we had five machine workshops which we rationalised into two—one at St Athan and one at Almondbank.[60]

83. DARA has certainly operated in a challenging environment. These challenges include: exacting demands from MoD; the need to make decisions affecting the livelihoods of people and the mixed responses among employees and other stakeholders that change programmes can bring and, from 2003, MoD's End to End Review of logistics.

84. Despite these challenges, DARA's performance as a trading fund has been impressive. In 2004-05, DARA's turnover was £171m (£189m in 2003-04) and profit in 2004-05 was £6.5m (£6m in 2003-04).[61] In 2004 DARA met all four key performance targets for quality, business performance and efficiency, business sustainability and efficiency. Air Vice Marshal Thornton told us that, "DARA has provided support in the past exceptionally well".[62]

85. During the course of our inquiry, neither the performance of DARA as a trading fund nor the quality of its workforce and support for RAF aircraft has ever been brought into question.

86. Despite the clear potential impact of the End to End Review of logistic provision on DARA as the key provider of depth support for RAF aircraft, Mr Hill suggested that DARA management was not included in any discussions, despite many protests, concerning DARA's future until after the key decisions had already been taken. He told us "As far as the rolling forward of Tornado and Harrier, and elements like that, that was given to us as a fait accompli, effectively".[63] Despite its protests, DARA management was not fully included from the outset in the End to End Review process. That was wrong.

DARA's future

87. The Minister's announcement of 8 November 2005 effectively means the end of the DARA trading fund as it was envisaged in 2001.[64] After only four years of trading, DARA's role of providing MoD with 'a benchmark and competitive alternative to industry' has ended. The impact of this decision, which places the RAF at the risk of complete reliance on a monopoly supplier, can only be judged over the longer term.

88. The Minister emphasised that the changes to aviation support should be seen in a wider context of changes to support in all three Services. The Minister also emphasised the importance of seeking continuous improvement:

    The concept that because you have done something—you have made a change—that should be the end of change, when you know that you are having to drive out significant costs from your overheads and your support in terms of defence logistics, I do not think would be the right approach for me to adopt or for the department to adopt.[65]

89. It is unquestionably important that the RAF learns lessons from operations and seeks continuous improvement in all its processes. It is also important that newly established public agencies, like DARA, are given time to prove their worth and are not undermined before their performance can be properly assessed.

90. It is striking that MoD has reconfigured its air logistic provision only four years after a similarly significant reconfiguration had been completed. This suggests that either the original decision to establish DARA was unsound or the recent decisions affecting its future are misjudged. Either way, it is hard to escape the conclusion that MoD has in recent years contributed to a period of unnecessary turbulence and uncertainty in aviation logistics provision.

91. We recommend that MoD provide more detail of what the 'market testing' of DARA Fleetlands and DARA Almondbank will entail. The longer the period of market testing, the more uncertainty there will be for DARA management and employees. This will inevitably impact on DARA's business planning and ability to attract commercial work. It is vital that the future arrangements for RAF aircraft are of the highest possible standard and, at the very least, match the service provided by the current arrangements.

92. MoD recognises that the decision to concentrate rotary wing depth maintenance at DARA Fleetlands "is not without risk".[66] MoD identifies these risks as:

  • Ensuring the timely provision of spare parts;
  • Ensuring the leaning of work practices;
  • Ensuring sufficient volume of work (MoD describes the commitment to provide DARA with 700,000 hours in 2005/06, 850,000 hours in 2006/07 and 1 million hours of work in 2007/08 as 'challenging').[67]

The first two risks apply equally to depth support undertaken at RAF MOBs. The third risk: ensuring sufficient volume of work seems dependent on continuing of operations in Afghanistan, Bosnia and Iraq at current levels. This assumption cannot be made with any certainty and in any case is clearly outside DARA's sphere of influence. We are concerned about the sustainability of MoD's commitment to concentrating rotary wing support at DARA Fleetlands. It is crucial that MoD give DARA Fleetlands the necessary time, resources, and backing it requires to establish itself as a first class provider of rotary wing depth support.

DARA St Athan

93. In 2003, at the same time that MoD was conducting a fundamental review of the structure of its Armed Forces and before the conclusion of the End to End Review of its air logistics, MoD decided "to consolidate the work at DARA St Athan into a single purpose-built building, replacing a series of badly maintained World War Two facilities".[68] The work on creating a "Superhangar", able to accommodate up to 48 fast jets, was funded through a joint project between MoD and the Welsh Development Agency (WDA) (a sponsored body of the Welsh Assembly Government) known as the Red Dragon Project. MoD told us that its expenditure to date on the Red Dragon Project amounts to £43.9m and that the WDA has to date spent £16m. Total cost on the completed project is estimated to be £90m-£104m.[69]

94. During our visit to St Athan, we visited the 65,000 sq.metre "Superhangar" (opened in February 2005) and were impressed by its facilities. The advantages of housing the aircraft under one roof were made clear and overall, the facilities including the maintenance bays, work areas and heating systems were vastly superior to those we saw at RAF Marham. The workforce we met at St Athan were understandably concerned for their futures following the announcement to move fast jet support work to RAF Marham, but they were also angry that the Superhangar facility, built to house fast jets, faced such an uncertain future. All those management and staff we met at St Athan displayed pride in the achievements of DARA but also a considerable sense of disquiet at the way they felt they had been treated by MoD.

95. MoD's decision to concentrate both Harrier and Tornado support away from DARA St Athan has led some commentators to describe the Superhangar as a White Elephant.[70] Indeed it is currently unclear what work, apart from maintenance of VC10 tankers (which have an Out of Service Date of 2011), will be done in the Superhangar after the last Tornado GR4 has left St Athan in early 2007.

96. We note that by concentrating support for the VC10 at St Athan, some existing jobs will be safeguarded until the VC10 OSD of 2011. We welcome the decision by the aerospace company ATC Lasham, announced on 19 October 2005, to locate its Boeing 737 and 767 aircraft maintenance business at St Athan (creating 300 jobs over the next 18 months). Nevertheless the long term future of DARA St Athan is uncertain.

97. We remain concerned about the long term viability of the St Athan site. In light of the end of the fast jet business and the VC10 having an Out of Service Date of 2011, Government departments must work with the National Assembly for Wales and its agencies in encouraging alternative commercial investment to guarantee the long term viability of St Athan as a matter of urgency.

98. MoD told us that its decision to commit £104m of public money to building an aircraft hangar at DARA St Athan as part of the Red Dragon Project was taken at a time when the assumptions on which its aircraft logistic provision was based were about to be reviewed through the End to End Review. MoD also told us that, "DARA's viability as a Trading Fund was an issue before the decisions on Red Dragon and the future depth support of the RAF's fast jets were taken".[71]

99. MoD defended its decision to initiate the Red Dragon Project on the grounds that it had resulted in efficiency savings which would soon meet the cost so far outlaid. The Minister told us:

    On the best information it was a correct decision. Do I think it was the best decision now? The answer is yes, because it will still get the pay back required from it. I have always asked myself the question: Did I do right? Yes, I did. Subsequently, have I done right? Yes, I have.[72]

100. We consider that the decision to go ahead with the funding for the Red Dragon project in 2003 was incomprehensible given the uncertainty surrounding air logistic provision at the time. MoD admits that the viability of DARA was an issue even before the decision to commit £104m of public money to Red Dragon and the decision on support for fast jets were taken. With the future so uncertain it was extraordinary to go ahead with Red Dragon in the knowledge that the provision for future support was under review. The decision is a clear example of a lack of joined-up government within Whitehall and between MoD and the National Assembly for Wales and its agencies. As things currently stand, the Superhangar is a valuable facility with no clear future. We recommend that the National Audit Office and the Wales Audit Office examine whether public money was properly spent on the Superhangar.

101. Nevertheless we believe that the combination of state-of-the-art facilities and an enthusiastic and skilled workforce at St Athan provide a tremendously attractive opportunity for commercial investment. We expect government departments to work energetically to attract commercial investment to the St Athan site.

59   Ev 44 Back

60   Q 69 Back

61   DARA Annual Report and Accounts 2004-05, HC 304 Back

62   Q 126 Back

63   Q 74 Back

64   HC Deb, 8 November 2005, c 161 Back

65   Q 114 Back

66   Ev 52 Back

67   Ev 57 Back

68   Ev 51 Back

69   Ev 61 Back

70 Back

71   Ev 50 Back

72   Q 190 Back

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Prepared 18 January 2006