Select Committee on Defence Written Evidence

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


  Table 1 below breaks down the Department's estimate for Direct Resource Expenditure in RfR2 in Iraq and Afghanistan.

Table 1

RDEL Expense Category Iraq—£ millionAfghanistan—£ million
Service Manpower80.278 7.172
Civilian Manpower11.688 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 Consumption202.936 33.918
Contingency (5)55.000 14.000

Total Direct Resource DEL
784.877 148.688


  (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).


  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

CDEL Expense TypeIraq—£ million Afghanistan—£ million
UORs and Recuperation 199.944 53.053
Total Capital DEL259.944 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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