Select Committee on Defence Sixth Report

2  Annual Performance Report

PSA Objectives and Targets

4. Table 1 in the Annual Performance Report provides a summary of performance against the 2002 Spending Review Public Service Agreement (PSA) Objectives and Targets.[3] MoD has six targets under three key objectives, and a seventh value for money target. Some of the targets have supporting performance indicators. A summary of MoD's performance is provided at Table 1 below.

Table 1: Summary of MoD performance against PSA Targets
PSA Target Achievement
Objective I: Achieve success in the military tasks that we undertake at home and abroad
1. Achieve the objectives established by Ministers for Operations and Military Tasks in which the UK's Armed Forces are involved, including those providing support to our civil communities. Met
2. Improve effectiveness of the UK contribution to conflict prevention and management as demonstrated by a reduction in the number of people whose lives are affected by violent conflict and a reduction in potential sources of future conflict, where the UK can make a significant contribution. Joint target with DfID and FCO. Not yet assessed
Objective II: Be ready to respond to the tasks that might arise
3. By 2006 ensure that a minimum of 90% of high-readiness forces are at their required states of readiness with no critical weakness. Met
4. Recruit, retain and motivate the personnel needed to meet the manning requirement of the Armed Forces, so that by the end of 2004, the Royal Navy and RAF achieve, and thereafter maintains, manning balance, and that by the end of 2005, the Army achieves, and thereafter maintains, manning balance Partly Met
5. Strengthen European security through an enlarged and modernised NATO, an effective EU military crisis management capacity and enhanced European defence capabilities. Joint target with FCO. Met
Objective III: Build for the future
6. Develop and deliver to time and cost targets military capability for the future, including battle-winning technology, equipment and systems, matched to the changing strategic environment. Partly met
Value for Money
7. Increase value for money by making improvements in the efficiency and effectiveness of the key processes for delivering military capability. Year-on-year output efficiency gains of 2.5% will be made each year from 2002-03 to 2005-06, including through a 20% output efficiency gain in the DLO. On course

Source: Ministry of Defence

5. We focused on those PSA targets which had either been partly met or were on course.

Recruitment and retention

6. PSA Target 4 relates to MoD's performance in recruiting, retaining and motivating Service personnel and MoD's performance against this Target is assessed as "Partly Met".


7. The first supporting performance indicator is to "achieve manning balance", defined as between -2 per cent and +1 per cent of the total manning requirement. As at 1 April 2005:

There was, therefore, a 4.9 per cent shortfall in the Royal Navy / Royal Marines; a 1.7 per cent shortfall in the Army; and a 1 per cent surplus in the RAF. This supporting performance indicator was assessed as "partly met". [5]

8. Mr Jeffrey acknowledged that the Royal Navy was facing a significant challenge in manning, but he told us that the forecast deficit for April 2006 was 3.6 per cent which "suggests that it is now moving in the right direction".[6] We were briefed on manning levels when we visited Fleet Command Headquarters on 9 February 2006, and were told that the overall situation was improving but that there was a serious shortage at Petty Officer level because of a cut-back in recruitment in the early 1990s.

9. We are concerned that as at 1 April 2005 there was a 4.9 per cent manning shortfall in the Royal Navy / Royal Marines against the overall requirement. We note that by April 2006 the shortfall is expected to reduce to 3.6 per cent and look to MoD to take action to ensure that the improvements continue and to address the serious shortages at Petty Officer level.


10. The second supporting performance indicator is to "achieve single Service guidelines for deployed separated service". All three Services have agreed Harmony Guidelines to allow members of the Armed Forces to have sufficient time to recuperate from operations; for unit, formation and personal training and development; and to spend more time at home with their families. This was assessed as "partly met". Surprisingly, given its manning shortfall, breaches of Harmony Guidelines in the Royal Navy are judged to be isolated.[7] Mr Jeffrey told us that "that may reflect the fact that the Navy, although it is much involved in current operations, is rather less involved than the other two Services".[8]

11. In respect of the other Services, the Annual Performance Report states that:

    Army: Some breaches of Harmony in the Army have been unavoidable owing to the level of operational tempo. Breaches of recommended tour intervals have been unavoidable for some Force Elements due to the current level of operational tempo, with Infantry averaging 21 months (18 months in 2003-04) and Royal Artillery 19 months (18 months in 2003-04).

    RAF: 3.9% of personnel more that 140 days detached duty over 12 months.[9]

A breakdown of the RAF personnel who exceeded the guideline for separated service is provided in MoD's second memorandum.[10]

12. We asked whether the three Services had management information systems which allowed them to work out the position of individual Service personnel relating to Harmony Guidelines.[11] MoD's second memorandum noted that individual separated breaches of service and breaches of harmony were currently managed under single Service arrangements using several information systems. However:

    the Joint Personnel Administration (JPA) change programme is introducing a harmonised personnel administration system for all military personnel that will make it possible to work out the separated service of every individual in the Armed Services using a single IT system.[12]

During our visit to Land Command Headquarters on 27 February 2006, we were told that it would be three years before information on individuals was readily accessible.

13. We note that there have been some breaches of Harmony Guidelines in all three Services, but that the impact has been greater in the Army owing to the level of operational tempo. Members of the Armed Forces need time for training as well as for recuperation after operations, and they need time with their families, and we look to MoD to take action to ensure that breaches of Harmony Guidelines are minimised. Greater priority should be given to developing management systems which allow the pressure on individuals to be monitored.

14. The Annual Performance Report states that "Areas of critical shortage remained in all three services".[13] It provides further details about the shortages:

    there have been over twenty-five operational pinch point trades in 2004-05 including recovery mechanics, radiologists, ammunition technicians, information systems engineers, explosive & ordnance and military intelligence personnel.[14]

A list of the pinch point trades for all three Services as at February 2006 was provided in MoD's second memorandum.[15] This noted that the lists are "dynamic with trades moving on and off them according to the manning situation".[16]

15. In the Royal Navy there were shortages in several trades including fast jet and helicopter pilots.[17] During our visit to Fleet Command we were told that there was particular concern about the shortage of aircrew and Royal Marines junior ranks.

16. In the Army there were shortages in several trades including mechanics, bomb disposal and military intelligence. There were also shortages in medics, including Anaesthetists, Orthopaedic Surgeons, General Surgeons and Nurses. Shortages in the Defence Medical Services have been long-standing. The Annual Performance Report states that there had been a "further reduction in overall shortfall in medical personnel from 23 per cent to 20 per cent".[18] During our visit to Land Command, we were told that the Army had a management plan for each of the pinch point trades. There was little prospect of addressing the substantial shortfalls relating to Anaesthetists and General Surgeons, but it was considered that reservists could be used very effectively in these roles.

17. In the RAF the pinch point trades included engineers, weapons support and medical personnel. During a visit to Strike Command Headquarters on 9 March 2006, we were told there was particular concern about shortages of RAF Regiment gunners, firefighters and Motor Transport drivers and mechanics.

18. We are concerned that there are critical shortages, in various specialist trades, in all three Services, including aircrew and medical personnel. We note that the overall shortfall in medical personnel has reduced from 23 per cent to 20 per cent, and look to MoD to take further action to address this substantial shortfall in such a vital area.

19. We asked about the impact of overstretch on operations. MoD told us that it judged that the impact on the planned deployment to Afghanistan and on readiness for future operations was manageable. However, tour intervals for a number of pinch point trades were likely to breach Harmony Guidelines as the scale of effort in Afghanistan was increased. MoD was seeking to encourage "appropriate contributions from our NATO Allies in Afghanistan in order to take some of the pressure off these pinch points".[19] We note that MoD considers that the impact of manning shortages on the deployment to Afghanistan is manageable, but we plan to monitor this closely in our inquiry on that deployment.


20. The Annual Performance Report states that the Army is:

21. We asked what was being done to make Army recruitment effective. Mr Jeffrey told us that:

    Apart from keeping up a very strong recruitment effort, the steps that are being taken are steps around improving recruitment, training, responding to the Deepcut events, looking at the way in which we support recruits under training through welfare and in other ways and, by these means, giving potential applicants the confidence that they need to put themselves forward, but it has to be recognised that we are operating in quite a difficult recruitment climate with still historically pretty high levels of employment, so the task of the Army recruiters is not straightforward.[21]

22. We asked about the damage that had been done by the Deepcut events and the related publicity. Mr Jeffrey considered this hard to assess but told us that everyone in the MoD from the Secretary of State down was utterly committed:

    to addressing this set of issues around the way in which we care for our military and civilian staff and the nature of the training experience and the culture of training establishments.[22]


23. As at 1 April 2005, MoD employed some 108,470 Full Time Equivalent civilian staff.[23] Mr Jeffrey told us that the civilian element of MoD was important to almost everything that MoD and the Armed Forces did, but noted that "taken across the board, our efficiency savings involve quite significant reductions in the numbers of civilian staff".[24] Where there were civilian job losses, MoD would ensure that there was:

    consultation with the unions and with a full appreciation of the fact that the decisions we take…. are ones that also take account of the human dimension because it is very important.[25]

24. During our visit to Fleet Command Headquarters we were briefed on the merger of the Fleet Headquarters Top Level Budget (TLB), and the Second Sea Lord TLB. This was expected to result in a variety of efficiency savings as well as enhanced operational effectiveness:

  • 450 fewer people would be employed at the new Fleet HQ, representing a 25 per cent decrease in personnel from the old command structure;
  • 300 fewer civilians would be employed at Fleet compared with the old command structure. This had been achieved without the need for compulsory redundancies;
  • £16 million savings in operational costs per annum.

25. At Land Command, we were briefed on the merger of Land Command and the Adjutant General's Department (known as Project Hyperion). We were assured that the lessons from the Fleet merger were being learned. MoD told us that the reorganisation was "expected to generate savings of about 110 military and 240 civilian posts" and that a decision on the preferred location of the new headquarters should be taken in late Spring 2006.[26] At Strike Command we were briefed on the plans for closure of Personnel and Training Command at RAF Innsworth, and its effect on staff morale. We support MoD's drive for greater efficiency but note that it is likely to result in substantial numbers of civilian job losses. We look to MoD to undertake the appropriate consultation with the organisations which represent its civilian staff and to provide as much support as possible to those who lose their jobs.


26. The Annual Performance Report provides details of MoD's achievements in relation to diversity, and states that:

    As at 1 April 2005, women comprised 9.0% of UK Regular Forces, and 10.5% of the total 2004-05 intake.

27. MoD's performance against its diversity targets has been mixed in relation to both its Service and civilian personnel. It is disappointing that both the Royal Navy and the RAF failed to meet their target for recruiting from ethnic minorities. MoD was significantly below some of its targets relating to women, ethnic minority and disabled personnel in the Civil Service. We look to MoD to identify ways to improve in those areas where it is falling significantly below its diversity targets.

Defence Procurement

28. PSA Target 6 relates to MoD's performance in developing and delivering military capability for the future to time and cost targets. MoD's performance against this target is assessed as "partly met". MoD did not meet the two Supporting Performance Indicators relating to time slippage; it met the Supporting Performance Indicator relating to meeting customers' requirements; and partly met the Supporting Performance Indicator relating to cost increases.[28] In contrast, Table 19 in the Annual Performance Report, which provides details of the Defence Procurement Agency's Key Targets and Achievements, reports that the DPA met five of its six Key Targets in 2004-05, including the Key Targets relating to time slippage and cost increases.[29]

29. We asked why the reported achievements against targets relating to procurement in Table 1 and Table 19 appeared to be different. Mr Jeffrey told us that:

    I think the reason for the disparity is that the main PSA targets are supplemented by a set of key targets which measure success in the procurement of equipment projects. If you look at the key targets, which are the ones on page 102 [Table 19], the DPA met five of six of these, which was an improvement on what they had done previously, but certainly, if you step back from that and look at the PSA target as a whole, the position is, I think, more accurately captured at the beginning of the document [Table 1]in the way that I have described.[30]

30. MoD's Performance Report shows that MoD only 'partly met' its PSA Target relating to procurement, missing the targets relating to time slippage and cost increases. In contrast, the Report shows that the Defence Procurement Agency met five of its six Key Targets, only missing one target on customer satisfaction. We expect MoD to review the way that its performance in relation to defence equipment procurement is reported in order to provide a clearer picture on whether performance is improving or not.

31. In its Major Projects Report 2003, the National Audit Office reported in-year cost increases of £3.1 billion on the top 20 defence equipment projects.[31] In its Major Projects Report 2004, it reported in-year cost increases of £1.7 billion.[32] We asked what had been the effect of these cost overruns, totalling almost £5 billion, on MoD's ability to manage its future programme.[33] Mr Jeffrey told us that "it has a very significant effect; it is something that we clearly need to take into account".[34] In its second memorandum, MoD states that:

    Whilst it is inevitably the case that if we have to spend more of our resources on one project, less will be available for other purposes, there is not a simple relationship between historic cost-growth on one project and reduced spending elsewhere; the adjustments we make are the result of the interplay of a wide range of issues across the Defence Budget as a whole…. We continue to work to reduce cost-growth on equipment projects because widespread and unchallenged cost growth puts pressure on the total capability we can deliver…. Ministers and senior officials will continue to drive forward the necessary changes.[35]

32. The NAO's Major Projects Report 2005 reported in-year cost decreases of some £699 million on the top 20 defence equipment projects.[36] However, the NAO noted that:

    the decreases in forecast costs this year were primarily due to reductions in the numbers or capability of the equipment driven by changed budgetary priorities and changed Customer requirements.[37]

We asked whether the reported decrease was due to a reduction in the amount of equipment being ordered. Mr Jeffrey told us that "there is a significant element of it which can be described in that way, though it is not by any means the whole story".[38]

33. We note that in 2004-05, in-year cost decreases of some £699 million were reported on the top 20 major defence equipment projects. However, a 'significant element' of this decrease related to a reduction in the numbers of equipments being ordered. In our view, it is not a great achievement to report an in-year cost decrease, if this is only because less equipment, or less capable equipment, has been acquired.

34. Mr Jeffrey told us that there was a readiness to acknowledge that the acquisition of large defence equipment projects had not been handled well in the past. His general sense was that there had been some improvements in the way in which acquisition was undertaken. He told us that he would be paying a lot of attention to whether the DPA had the staff, the training and the skills it needed to implement the Smart Acquisition principles.[39]

35. Mr Jeffrey did not think there was any sense in which MoD was "asserting that in the procurement area we are meeting all of our targets".[40] He thought he needed to apply a lot of attention to the "whole question of how we procure and acquire equipment for defence…. although improvements have been made, there is still a great deal to do".[41]

36. On our visit to the Defence Procurement Agency on 26 January 2006, we were impressed by the candour and realism of the Chief of Defence Procurement and his team and the action in hand to improve acquisition performance. We have also been impressed by the vigour and commitment to change which the new Minister for Defence Procurement is bringing to the procurement process. The Defence Industrial Strategy, published in December 2005, requires improvements from both industry and MoD. Mr Jeffrey told us that:

    We are also up for serious and significant improvement in the way in which procurement is managed by the Department, but, as part of the follow-through to the Defence Industrial Strategy, there is a project which I instituted myself shortly after I arrived in which we will be looking hard at the way in which the procurement function operates, how it is structured, how the processes work, and looking at ways in which we can generally make it work better, and I am utterly committed to that.[42]

As part of our inquiry into the Defence Industrial Strategy, we are examining the changes needed to MoD's current approach to equipment procurement.

37. We fully support MoD's efforts to improve procurement performance. We note that a review of defence procurement has been instituted and expect the recommendations of the review to be implemented both quickly and fully. Improvements in the way MoD procure equipment are vital to the success of the Defence Industrial Strategy and we plan to monitor this closely.

Value for Money

38. PSA Target 7 relates to MoD's performance in achieving value for money, and MoD's performance is assessed overall as "on course".


39. One of the supporting performance indicators is to reduce the cost of training a military recruit by an average of six per cent by April 2006. It is reported that this was not met and that:

40. When asked why this target had been scrapped, Mr Woolley said that it was:

    because the target was very much related to measuring training on a single service basis and because of the creation of more joint service establishments it is not really possible to make the measure on a single service basis any more.[44]

We find MoD's explanation as to why they had scrapped a target for reducing the cost of training a military recruit to be unconvincing. As part of its consideration of the outcome of the Defence Training Review, we recommend that MoD reconsider whether they should have a value for money target in such a key area as training.


41. Another supporting performance indicator is to:

It is reported that this was "ahead" as the DLO costs reduced by 4.2 per cent in 2004-05. This is a major element of MoD's efficiency programme. The overall Efficiency Programme has a goal of achieving savings of £2.8 billion.[46]

42. The Annual Performance Report states that over £400 million of savings in DLO operating costs have been delivered in 2004-05, although these reported savings were said to be "subject to validation".[47] It appeared surprising to us that £400 million from one MoD organisation was achieved in 2004-05, and we asked why these savings had not been identified and achieved in previous years. Mr Woolley considered that "the PSA Target system and indeed following on from the spending review 2002 PSA Target, the Gershon Efficiency Target has perhaps acted as something of a catalyst".[48]

43. Given that it was over nine months since the end of the 2004-05 financial year, we asked whether the £400 million had now been validated. MoD's second memorandum states that:

    The DLO efficiency achievement in 2004-05 is still being assessed in an internal audit to review the evidence supporting judgement of the level of benefits realised in the year. It is likely that this will indicate that some of the operating cost savings included in the total of over £400 million reported in paragraph 209 of the Annual Report and Accounts 2004-05 cannot be validated.[49]

The memorandum does not indicate how much of the £400 million is unlikely to be able to be validated.

44. MoD reports substantial savings in its Annual Report and Accounts yet, when pressed by us, informs us that some of the reported savings "cannot be validated". This is worrying. We expect figures in MoD's Annual Report and Accounts to be based on robust evidence and look to MoD to introduce systems which can generate accurate figures relating to savings, rather than figures which cannot be substantiated fully. Overstating savings undermines confidence in the accuracy of the Performance Report.

45. We consider that there is a strong case in the future for the National Audit Office to provide an opinion on the savings figures claimed by the MoD in its Performance Report, as we have little confidence in the accuracy of such figures.

46. We were concerned that there was a real danger in the future of MoD not being able to support the front line in an efficient, sustainable and reliable way. Mr Jeffrey told us that:

    there are no indications that the pursuit of efficiency has in itself prejudiced the Defence Logistics Organisation's ability to meet the requirements placed on it to support its customers in the frontline.[50]


47. MoD's Performance Report provides examples of improved logistics delivery in 2004-05. One of these relates to the Tornado support facilities at RAF Marham, which we visited as part of our inquiry into Delivering Front Line Capability to the RAF. [51] It states that:

    At RAF Marham the introduction of 'Lean' engineering and support principles in the Tornado Propulsion Facility in partnership with Rolls Royce produced cost savings of £88M over 4 years, with the Pilot contract saving £9M in the first year. [52]

48. We asked MoD to check whether all the £88 million reported savings had been achieved or whether they were a mixture of achieved and projected savings.[53] MoD subsequently provided details of the reported cost savings of £88 million and the years in which they were achieved.

Table 2: Reported savings of £88 million relating to Tornado support arrangements

£ million


£ million


£ million

Reductions in Tornado Propulsion Flight Local Unit Establishment 4 4
Reduced engine rejections 21 (part year)50 71
Introduction of pilot contract with Rolls-Royce Defence Aerospace in October 2003 4 (part year)9 13
Total 25 6388

Source: Ministry of Defence[54]

49. This shows that the savings of £88 million were achieved in two years, rather than the four years stated in the Annual Report and Accounts. The Annual Report and Accounts states that the pilot contract with Rolls Royce saved £9 million in the first year, but the subsequent information from MoD shows that a £9 million saving from the pilot contract was achieved in 2004-05 but a further £4 million saving from the pilot contract had been achieved in the previous year. Follow-up information provided by MoD showed that the savings of £88 million on Tornado aircraft support were achieved in two years, not four years as stated in MoD's Performance Report. This is a notable achievement. Nevertheless, once again, it raises questions about the accuracy of information provided in the Performance Report and we look to MoD to ensure that more accurate information is provided in the future.


50. The Disposal Services Agency is responsible for selling surplus equipment. The Performance Report states that the Agency "had a successful year in which it achieved £21.6 million in gross cash receipts against a target of £20 million".[55] Major disposals included the sale of: T56-15 Engines; Off Shore Patrol Vessels; Stingray; MkII Depth Charge; and Tank Transporters and Vehicles.[56]

51. We asked whether MoD had bought back any surplus equipment in the year.[57] Mr Woolley told us that he was not aware of any cases.[58] MoD subsequently told us that they had identified two cases of buy back of surplus equipment in 2004-05:

    The Sea King Integrated Project Team purchased minor parts costing £500;

    The Maritime Logistics Support Integrated Project Team purchased minor spares for workshop based repairs costing £72,836. These replaced items that had previously been sold under a stock rationalisation programme on the basis of low usage but were then subsequently required.[59]

52. We are surprised to learn that stock sold under a rationalisation programme had to be bought back for some £73,000 as it was subsequently found to be needed. We expect MoD to learn lessons from this case and, in future, to assess properly the future need for items before they are disposed of.

Defence Agencies

53. Much of MoD's work is undertaken by Executive Agencies. The Annual Report and Accounts provides details of the Defence Agencies and their performance against their key targets.[60] A list of these Defence Agencies is reproduced at Table 3. As at 1 April 2005 there were 31 Agencies, five of which were Trading Funds and the other 26 'on-vote' agencies.

Table 3: Defence Agencies which reported performance in the Annual Report and Accounts 2004-05
Defence Agencies
Armed Forces Personnel Administration Agency Defence Vetting Agency
ABRO (Trading Fund) Disposal Services Agency
Army Training and Recruiting Agency Duke of York's Royal Military School
British Forces Post Office Medical Supplies Agency
Defence Analytical Services Agency Met Office (Trading Fund)
Defence Aviation Repair Agency (Trading Fund) MoD Police and Guarding Agency
Defence Bills Agency Naval Recruiting and Training Agency
Defence Communication Services Agency Pay and Personnel Agency
Defence Dental Agency Queen Victoria School
Defence EstatesRAF Training Group Defence Agency
Defence Geographic and Imagery Intelligence Agency Service Children's Education
Defence Intelligence and Security Centre UK Hydrographic Office (Trading Fund)
Defence Medical Education and Training Agency Veterans Agency
Defence Procurement Agency Warship Support Agency
Defence Science and Technology Laboratory (Trading Fund)
Defence Storage and Distribution Agency
Defence Transport and Movements Agency

Source: Ministry of Defence[61]


54. There have been a number of organisational changes relating to Defence Agencies, as set out in the Annual Report and Accounts:

55. We questioned the witnesses about these changes. Mr Jeffrey told us that there had been a measure of rationalisation in relation to Defence Agencies and the kind of tasks they undertook.[63] Mr Woolley explained:

    In recent years we have begun to look at whether the overheads that go with a very decentralised structure of having lots of budgetary layers, for example—which although it has management benefits it also creates a certain amount of overhead…. Some of the very small agencies just no longer seem to be of sufficient size to justify agency status with some of the requirements that go with agency status…. So there has been some rationalisation of agencies in recent years reflecting that more general reassessment of whether the decentralising tendency in the Department went perhaps a little too far in the 1990s.[64]

56. Mr Woolley expected that the number of agencies would continue to fall.[65] In principle, we support MoD's policy of rationalising the number of Defence Agencies, particularly those very small agencies where the costs of retaining agency status can be high. However, for some agencies there may be a strong case for retaining agency status and we expect MoD to review each agency on a case by case basis.

57. It is the intention to collocate the Defence Logistics Organisation's Board with the Defence Procurement Agency's Executive Board at the earliest opportunity.[66] We asked whether there were any plans to merge the Defence Procurement Agency (DPA) with the Defence Logistics Organisation (DLO). Mr Jeffrey told us that:

    That is one of the issues, as I mentioned earlier, we need to address. I am struck, again as an early impression, by the fact that the two organisations do work closely together; the Chief of Defence Procurement and the Chief of Defence Logistics are in constant very close contact, as are their senior teams. There are a number of major projects, where we increasingly think in through-life terms, where the project team in effects accounts to both organisations. So there is a question about how far along the path towards integration one goes, if not actual merger.[67]

58. On our visit to the Defence Procurement Agency on 26 January 2006, we were told that there would be advantages and disadvantages in a DPA / DLO merger. Many of the Integrated Project Teams worked for both the Chief of Defence Procurement and the Chief of Defence Logistics, which reflected the through-life approach to project management. However, there were differences between the organisations: the DPA was responsible for high risk projects, whereas the DLO's focus was on the front line.

59. We note that there are plans to collocate the Defence Procurement Agency's Executive Board and the Defence Logistics Organisation's Board. We support the move to bring both organisations close together, particularly given that projects are now managed on a through-life basis.


60. Defence Agencies are set targets each year and the performance of the Defence Agencies against their targets, for 2003-04 and 2004-05, are set out in a table in the Annual Report and Accounts.[68] Overall, the performance has been very mixed and inconsistent over time. For example, the Defence Storage and Distribution Agency met 100 per cent of its targets in 2004-05, but only 33 per cent of its targets in 2003-04. The RAF Training Group Defence Agency met only 33 per cent of its targets in 2004-05, but 71 per cent of its targets in 2003-04.[69]

61. The number of targets each Defence Agency is set varies greatly. For example, in 2004-05, the Defence Vetting Agency had 12 targets and the Medical Supplies Agency had four targets. For some agencies the number of targets had reduced since 2003-04. For example, the British Forces Post Office were set 11 targets in 2003-04 and only six targets in 2004-05. But for others the number of targets had increased. For example, Service Children's Education were set 16 targets in 2003-04 and 29 in 2004-05.[70]

62. We asked MoD about the variation in performance and the number of targets set. Mr Jeffrey admitted that it was quite hard to assess whether the performance of Defence Agencies overall was improving and he was struck "by the sheer variety of purposes and the extent to which there is a variety in performance".[71] The overall percentage of key targets met had increased from 72 per cent in 2003-04 to 78 per cent in 2004-05.[72] However, he accepted that there was a wide variety among the agencies.[73]

63. MoD's second memorandum notes that all those involved in the process of drawing up key targets for Defence Agencies are expected to draw on identified best practice. In terms of the number of targets, Defence Agencies typically have between five and ten key targets, but the precise number varies depending upon the size and complexity of the agency and the challenges it faces in a particular year. MoD:

    recognise that in judging performance it is preferable to have a run of comparable data over a number of years. However, a balance needs to be struck between continuity and the need to improve and amend targets to reflect new or evolving priorities.[74]

Mr Jeffrey told us he was prepared to look at the way in which key targets for Defence Agencies were set and at whether there was a better way of measuring their performance.[75]

64. We found it difficult to judge the performance of the Defence Agencies, as set out in the Annual Report and Accounts, as both their achievements against the targets set, and the number of targets set, vary considerably from year to year. We look to MoD to ensure that in the future, changes are made to the reporting of the performance of Defence Agencies, so that it is easier to assess whether their performance is improving.

65. We have taken a close interest in the work of Defence Agencies. In our Future Carrier and Joint Combat Aircraft Programmes report we examined the Defence Procurement Agency's role in acquiring these two equipment programmes.[76] In our Delivering Front Line Capability to the RAF report we examined the impact on the Defence Aviation and Repair Agency (DARA) of the decision to concentrate on-aircraft support of the Tornado GR4 'forward' at RAF Marham.[77] We are also currently undertaking an inquiry into the Met Office and, as part of our Educating Service Children inquiry, we will examine the Service Children's Education agency.

3   HC (2005-06) 464, pp 12-15 Back

4   HC (2005-06) 464, p 13 Back

5   Ibid Back

6   Q 3 Back

7   HC (2005-06) 464, p 13 Back

8   Q 3 Back

9   HC (2005-06) 464, p 13 Back

10   Ev 26 Back

11   Q 8 Back

12   Ev 24, para 3 Back

13   HC (2005-06) 464, p 59 Back

14   HC (2005-06) 464, para 113 Back

15   Ev 23 Back

16   Ev 22, para 1 Back

17   Ev 23 Back

18   HC (2005-06) 464, p 59 Back

19   Ev 24 Back

20   HC (2005-06) 464, para 113 Back

21   Q 7 Back

22   Q 9 Back

23   HC (2005-06) 464, p 59 Back

24   Q 13 Back

25   Q 14 Back

26   Ev 24, para 4 Back

27   HC (2005-06) 464, p 59 Back

28   Ibid, p 14 Back

29   HC (2005-06) 464, p 102 Back

30   Q 23 Back

31   National Audit Office, Major Projects Report 2003, HC 195, Session 2003-04 Back

32   National Audit Office, Major Projects Report 2004, HC 1159-I, Session 2003-04 Back

33   Q 25 and Q 78 Back

34   Q 78 Back

35   Ev 27, para 9 Back

36   National Audit Office, Major Projects Report 2005, HC 595-I, Session 2005-06 Back

37   Ibid, para 1.5 Back

38   Q 27 Back

39   Q 29 Back

40   Q 22 Back

41   Q 1 Back

42   Q 31 Back

43   HC (2005-06) 464, p 14 Back

44   Q 81 Back

45   HC (2005-06) 464, p 15 Back

46   Q 17  Back

47   HC (2005-06) 464, p 95 Back

48   Q 46 Back

49   Ev 24, para 5 Back

50   Q 20 Back

51   Defence Committee, Delivering Front Line Capability to the RAF, Third Report of Session 2005-06, HC 557 Back

52   HC (2005-06) 464, para 210 Back

53   Q 98 Back

54   Ev 27, para 11 Back

55   HC (2005-06) 464, para 219 Back

56   Ibid Back

57   Q 93 Back

58   Q 94 Back

59   Ev 27, para 10 Back

60   HC (2005-06) 464, pp 210-211 Back

61   HC (2005-06) 464, pp 210-211 Back

62   HC (2005-06) 464, p 211 Back

63   Q 50 Back

64   Q 52 Back

65   Q 53 Back

66   HC (2005-06) 464, para 217 Back

67   Q 48 Back

68   HC (2005-06) 464, pp 210-211 Back

69   Ibid Back

70   Ibid Back

71   Q 54 Back

72   Ibid Back

73   Ibid Back

74   Ev 25, para 6 Back

75   Q 55 Back

76   Defence Committee, Future Carrier and Joint Combat Aircraft Programmes, Second Report of Session 2005-06, HC 554 Back

77   Defence Committee, Delivering Front Line Capability to the RAF, Third Report of Session 2005-06, HC 557 Back

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