Select Committee on Defence Seventh Report

4  How the MoD needs to change

Changes required of the MoD

45. The DIS acknowledges that changes will be required by the MoD as well as by industry.[81] At our oral evidence sessions and in the submissions we received, a number of areas were identified where the MoD needed to change to ensure the success of the DIS. The Chief Executive of BAE Systems, Mr Turner, told us the following changes were required:

  • A speeding up of the acquisition process;
  • More investment at the start of a programme to sufficiently de-risk it; and
  • The establishment of more realistic in-service dates and budgets for programmes.[82]

He also considered that for BAE Systems:

    the biggest issue for us, though, is the cultural one, the relationship over many decades now between the DPA and industry. That is where there has to be the most radical change.[83]

46. Table 3 sets out examples provided by industry of the areas in which the MoD needs to change to ensure the success of the DIS.

Table 3: Examples provided by industry of the areas where the MoD needs to change
Suggested changes required of the MoD
"MoD has a number of organisations whose policies and practice will need to be adapted to achieve the kind of coherence that DIS requires, such as introducing a genuinely whole life approach to acquisition. The challenge of changing culture must not be underestimated".[84]

"the procurement process has been slow, risky and expensive for industry…. at minimum, we are looking at probably quite a significant cultural change which may well require further organisational change. I think…. that this is the subject of a major review that the MoD itself is launching".[85]

"one of the consequences of the Smart Procurement reforms a few years ago…. [MoD] did set up an organisation that was fairly "stove-piped" - separate teams, separate organisations - and the transverse processes across the Ministry for linking things together and taking a common view were not sufficiently strengthened in that".[86]

"The Ministry of Defence thinks of itself as being communicative, open, and fair, but if you look into it from outside, it is difficult to read. They could do more in the future to be clearer about their future intentions, their priorities, their plans and we would all benefit immeasurably from that".[87]

"The American system is more open…. [UK] Civil servants are generally very reluctant to talk about budgets which are not 100 per cent committed…. This leaves industry guessing…. I think it is reflected in the various graphs you see in the Defence Industrial Strategy, which show very broad-brush expenditure in each of the sectors, whereas in the US you would see a huge amount more detail than that. The MoD used to give more detail out only a few years ago, but it has actually, over the last couple of years, withdrawn the amount of information it has been passing to industry through the various open days and is now probably communicating slightly less than even five years ago".[88]

Changes planned by the MoD

47. We asked what changes the MoD was planning to make. Lord Drayson said that there was a duty on the MoD to change, in order to demonstrate through its change that it was serious about the DIS. If he was running a defence company, he would be looking at how quickly MoD was getting on with the things it had promised to do. The Minister was very encouraged by what was happening in the MoD and told us that "I aim to surprise this Committee…. by the pace of change which we are able to achieve in the Ministry of Defence".[89] Lord Drayson had been described as "a man in a hurry". When we asked whether his officials in the MoD were in as much as a hurry as he was, he told us that "I think they are getting there".[90] We agree with the Minister for Defence Procurement that the MoD needs to demonstrate through its own change that it is serious about the Defence Industrial Strategy and we look forward to being "surprised" by the pace of change that the MoD achieves.

48. The MoD's new Permanent Under Secretary of State, Mr Bill Jeffrey, told us during our inquiry into the MoD Annual Report and Accounts 2004-05, that there was a readiness to acknowledge that the acquisition of large defence equipment projects had not been handled well in the past. He intended to pay a lot of attention to whether the Defence Procurement Agency (DPA) had the staff, the training and the skills it needed to implement the Smart Acquisition principles.[91] He also 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 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".[92]

49. The Minister also referred to this review of the acquisition process and said that the review team would be reporting by May 2006 on the changes which needed to be made. He considered that, where the MoD did do things well, they were done to the "gold standard", but that best practice needed to be spread and commercial skills within the MoD needed to be improved. It was acknowledged that the process for acquiring Urgent Operational Requirements (UORs) was done very well and that there was scope to take the best out of the UOR acquisition process and apply this to longer term projects.[93] In other areas, Pathfinder programmes had been introduced to allow the MoD and industry to work together to explore what through-life capability was.[94]

50. We were concerned by the suggestion that the MoD was providing less information to industry than in the past, and that the level of information provided in the US to defence companies was much more detailed compared with the UK. Lord Drayson told us that the DIS recognised that there needed to be more transparency because industry did not have enough information about future requirements. However, he said that the MoD did not want to "make the mistake of providing such clarity over where we saw the really smart, young innovative companies that we will provide a shopping list of acquisitions for bigger companies".[95] We look to the MoD to build upon the DIS and provide more information to industry in the future.

51. We welcome the fact that the MoD is seeking to identify improvements to its acquisition arrangements, including ways to speed the process up, and we look to the MoD to implement quickly the improvements identified. We expect the MoD to ensure that best practice is promulgated and the commercial skills of its officials are improved, particularly the legal and contract compliance skills needed to ensure well-drawn legal and production agreements involved in the new long-term partnering approach.

81   Cm 6697, Foreword Back

82   Q 251 Back

83   Q 274 Back

84   Ev 82 Back

85   Q 151 Back

86   Q 152 Back

87   Ibid Back

88   Q 153 Back

89   Q 289 Back

90   Q 288 Back

91   Defence Committee, Sixth Report of Session 2005-06, Ministry of Defence Annual Report and Accounts 2004-05, HC 822, Q 29 Back

92   HC (2005-06) 822, Q 31 Back

93   Q 289 Back

94   Q 253 Back

95   Q 290 Back

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