Second Memorandum from the Ministry of
Defence on the Spring Supplementary Estimates 2005-06
You sought further details of the Department's
estimated expenditure in Request for Resources 2 (RfR2), which
relates to Conflict Prevention
RESOURCE DEL
Table 1 below breaks down the Department's estimate
for Direct Resource Expenditure in RfR2 in Iraq and Afghanistan.
Table 1
MAKE UP OF IRAQ AND AFGHANISTAN RESOURCE
DEL ESTIMATE
| RDEL Expense Category
| Iraq—£ million | Afghanistan—£ million
|
| Service Manpower | 80.278 |
7.172 |
| Civilian Manpower | 11.688 |
1.116 |
| Infrastructure costs (1) | 84.082
| 25.663 |
| Equipment Support (2) | 243.097
| 14.832 |
| Other Costs & Services (3) | 103.984
| 46.070 |
| Income foregone (4) | 3.812
| 5.917 |
| Stock Consumption | 202.936
| 33.918 |
| Contingency (5) | 55.000 |
14.000 |
Total Direct Resource DEL | 784.877
| 148.688 |
| | |
Notes:
(1) Establishment of forward/deployed operating bases.
(2) Maintenance and small repairs to equipment.
(3) Consumables and other miscellaneous costs.
(4) Income that we would have generated if the operation
had not taken place.
(5) Contingency—to allow for changes in requirements
The Resource DEL costs were based on the Department's Top
Level Budget (TLB) forecasts as at Accounting Period 08 (ie November
2005).
CAPITAL DEL
The Department's estimate for Capital Expenditure in Request
for Resources 2 relates principally to equipment purchased as
Urgent Operational Requirements (UORs) and accelerated capital
repair costs on equipment in operational use.
Table 2 below breaks down the Department's estimate for Capital
DEL in RfR2 in Iraq and Afghanistan.
Table 2
MAKE UP OF IRAQ AND AFGHANISTAN CAPITAL DEL ESTIMATE ESTIMATE
| CDEL Expense Type | Iraq—£ million
| Afghanistan—£ million |
| UORs and Recuperation | 199.944
| 53.053 |
| Contingency | 60.000 | 17.000
|
| Total Capital DEL | 259.944
| 70.053 |
| | |
The majority of UORs, authorised over the last year, relate
to Force Protection (around 87%), helicopters, communications,
surveillance equipment, and medical equipment.
You also asked for an explanation of why these increases
were not foreseen at the time of Winter Supplementary Estimates,
noted that there have been such increases in successive years
and asked in what ways MoD was seeking to improve its forecasting
of costs for such operations. I should perhaps make clear that
historically the Department has not made any requests under RfR
2 at either Main Estimates or Winter Supplementary Estimates for
the costs of operations. The Spring Supplementary Estimates is
the first time that we request such resources and we do so then
for the total forecast expenditure for the whole year.
That is not to say that we do not forecast and monitor expenditure
on operations throughout the year. Indeed each TLB does so from
the start of the financial year. You will appreciate, however,
that, because of the nature of operations, there are usually significant
changes in the demand for military involvement in conflict prevention
activities through the year and it is often not possible to estimate
the likely cost of any major new operations with accuracy early
on. As a result forecasts will fluctuate during the year, and
so, with the agreement of HM Treasury, we await the Spring Supplementary
Estimates before requesting the additional resources, thereby
ensuring the Estimate is as accurate as possible. In the meantime
we provide regular information to HM Treasury, which includes
a best estimate of outturn.
We have a robust system in place to ensure that our forecasting
is as accurate as possible. It includes the following elements:
— Consultation with the Army's Management Accountancy
Services and the Defence Internal Audit organisations to monitor
and report on best practice for cost gathering;
— provision of comprehensive instructions to TLBs
on accounting for, and forecasting of, conflict prevention costs
on an annual basis;
— regular monitoring of costs, and liaison with
TLBs to ensure that their forecasts are robust;
— regular liaison with operational experts to ensue
that costings reflect the latest known position;
— regular liaison with HM Treasury to keep them
fully informed on best estimate of outturn;
— annual audit of the Conflict Prevention costs
contained within the Annual Report and Accounts. Hence the final
2004-05 outturn costs for Conflict Prevention have been audited
by the National Audit Office (NAO), who were satisfied that these
costs had been captured and reported correctly.
6 March 2006
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