Select Committee on Public Accounts Twenty-Sixth Report

2  LOGISTICS RISKS TO READINESS

13. Risks to readiness existed at a number of levels. As evidenced by Figure 2 above, there were risks to the delivery of the peacetime level of readiness that Front Line Commanders had been directed to achieve and for which they should have been fully resourced. And risks also existed in the Department's ability to generate forces from their peacetime readiness states to be ready to deploy on operations and then actually to deploy, sustain and recover them from specific operations.[16]

Cannibalisation of equipment

14. The redistribution of equipment parts from units that are not themselves scheduled for deployment is referred to as "cannibalisation". The Department relied extensively on cannibalising equipment and transferring spares between platforms to deploy and sustain forces, particularly at a time of high operational commitment.[17] For example, during Operation TELIC the Army cannibalised 44 Challenger 2 Main Battle Tanks, some 22% of the non deployed fleet. The Royal Air Force does not record cannibalisation (known in the RAF as aircraft "robbing") in the same way as the Army, choosing to focus on the number of incidents of aircraft robbing rather than the number of aircraft robbed. The number of incidents was highest for the Tornado GR4 and F3 fleets; 44 aircraft were deployed, with a total of 1622 incidents of aircraft robbing across the fleets.[18]

15. The need to cannibalise individual equipments arose mainly from the Armed Forces operating consistently above Defence Planning Assumptions and was one way in which the Department managed risk and prioritised its use of resources across the defence budget. Cannibalisation was a short-term measure of last resort designed to boost the immediate availability, and therefore readiness, of units actually deploying on operations. The Department stated that the United Kingdom's Armed Forces were not unique in this respect: the United States, as well as other military and civilian airlines around the world, used similar practices, where appropriate.[19]

16. Cannibalisation of equipment had longer term effects, however. It was frequently inefficient, introduced engineering risk and reduced the Department's ability subsequently to generate forces for even higher scales of effort. It could also reduce the pool of equipment available for training, leading to wider detrimental impacts on both individual and collective skills and future readiness levels. In addition, the extended use of cannibalised equipment would lead to it reaching the end of its useful life sooner than would otherwise have been the case.[20]

17. The Department noted that the increasing incidence of cannibalisation needed to be seen in context. For example, in the Royal Navy, recent increases in cannibalisation from five to 10 incidents each month to approximately 30 incidents were against a background of average monthly demands exceeding 15,000 items. Moreover, the Department considered that cannibalisation offered an affordable alternative to increasing stock levels within a tightly constrained Defence budget. In its view, it was a legitimate mechanism for solving supply difficulties without holding enormous stocks on the shelf when it could not predict which stocks would be required and in what timescales. Should cannibalisation become prevalent, however, the Department would reconsider its use.[21]

Reduced Support Period for the Fleet

18. Against the background of the continuing likelihood of the greatest operational demands being made of the Army and some elements of the Royal Air Force, the Department decided that it should reduce the readiness of some naval vessels. It therefore transferred around £310 million of resources previously available to the Royal Navy for the two years 2004-05 and 2005-06 to support the Army and Royal Air Force. To mitigate the risk of the Royal Navy not being able to provide a balanced set of capabilities to the Department's Joint Rapid Reaction Force during this period, if required, the Department introduced a "Reduced Support Period" arrangement in June 2004, aimed at making the best use of capital spares and prioritising funding for repair support. Under the revised arrangements, all ships were given either normal support status or reduced support status. Ships in the latter category would generally only receive support for defects affecting health and safety and environmental safety.[22]

19. While it regretted the introduction of the reduced support arrangements, the Department confirmed that they remained appropriate in order to continue to recuperate the Army from the warfighting phase of operations in Iraq in 2003 and to maintain forces in theatres such as Iraq, Northern Ireland and Bosnia, and to prepare for future commitments in Afghanistan. The introduction of the Reduced Support Period had not prevented the Royal Navy from undertaking all of its essential operational commitments so far, though, should the reduced support arrangements continue for a long time, that might not always be the case.[23]

20. Under the reduced support arrangements, the ships that were performing operationally essential tasks were receiving full support. Those ships which were less critical had a reduced level of support. For example, all submarines remained unaffected since the deterrent remained the top priority while the nature of specific tasks determined whether individual destroyers and frigates were subject to full or reduced support. The Department retained some flexibility under these arrangements, however, since some operations did not require certain items of equipment. For example, sonar which was used for anti­submarine warfare would not necessarily be required if a vessel was on guardship duty in the Caribbean.[24]

21. The Department would monitor this position carefully and had already provided further resources of £50 million since 2004 to ameliorate the impact on the Royal Navy. The Department intended to review the position in 2006 when it would look to ameliorate the funding situation further between then and 2008. The precise level of additional funding to be provided would depend upon the outcome of the review.[25]

Urgent purchases of equipment and stocks

22. Since Operation TELIC, the Department had reviewed its requirements for operational stocks and had purchased an additional £120 million of consumable operational items including, for example, Nuclear, Biological and Chemical clothing; desert uniforms and boots, and Enhanced Combat Body Armour. These stocks were now held in the Department's inventory and should be capable of being delivered to forces more quickly than would otherwise have been the case.[26]

23. In moving from actual levels of readiness to having forces that are ready to deploy and be sustained on operations the Department needs to increase the stockholdings of equipment and spares that it holds.[27] The Department could not maintain an inventory and force structure to cater for every possibility that might arise since this would be unaffordable. It therefore accepted that to meet the specific needs of individual operations it would have to supplement its force structure by making urgent purchases of equipment and stocks from industry. Such purchases provided very particular capabilities for specific operations which could not have been predicted in advance.[28]

24. The Department's Integrated Project Teams were required to take a longer-term view of the potential equipment gap between what the Armed Forces currently possessed and what might be required if certain operations were undertaken, and to incorporate the possible requirement for urgent purchases in contracts with industry at an early stage. To mitigate the risk that these urgent purchases would not be delivered in sufficient time for an operation, Integrated Project Teams had been tasked, as part of the Department's 2005 Logistics Sustainability and Deployability Audit process, to undertake assessments to determine the level of confidence that they had that industry could meet the assumed delivery times. Where gaps in assumptions were discovered, Teams were to consider modifying any existing contracts with defence industry to ensure the timely delivery of purchases.[29]

25. The Department had not always routinely collected information on the timely delivery of urgent purchases that it made. For example, for Operation TELIC, data on timely delivery were available for only 102 of the 194 urgent purchases made.[30] The Department had now created a single database to track progress of all urgent purchases, rather than simply reporting by exception when items had not been delivered. The Department considered that the defence industry was well accustomed to providing accurate forecasts on delivery times, which were mostly achieved, and the Armed Forces did not pay a premium for such equipment. The contracts under which urgent purchases were delivered were managed under normal contracting arrangements, albeit on a fast track basis.[31]

Asset tracking

26. During Operation TELIC, problems in the Department's logistic supply system resulted in shortages of key equipment such as body armour and armoured vehicle air filters available to front line forces. We were concerned to learn whether the Department could be confident that such problems would not arise again on any future operations.[32]

27. The Department said that it could not guarantee that such problems would not arise again since military judgment was the final arbiter of whether a force was ready for operations, balancing operational risk against waiting for the logistics to be fully delivered. Compelling military or political factors may, for example, override logistics considerations. The Department had, nevertheless, taken robust steps to manage and reduce the risks of similar problems happening in future and it had improved the supply system since Operation TELIC.[33]

28. Problems on that Operation were due partly to late changes in the planned entry point for United Kingdom forces into Iraq, resulting in significant changes to the composition of the force that needed to be supported and requiring the Department to meet much shorter readiness timescales than its planning assumptions for an operation of that size provided. In the event, most stocks were delivered to the Iraqi theatre in 2003 in sufficient time but weaknesses in the asset tracking system in place during the deployment and warfighting phases prevented some of these reaching the designated forces. Although in theory capable of tracking containers being dispatched into theatre, the system was slow and cumbersome, and took too long to identify what was contained in each shipping container. Consequently, the rate of supply build-up at the dockside in Kuwait was such that the asset tracking system was overwhelmed and essentially broke down and there had also been failures in associated satellite communications links.[34]

29. As part of an ongoing programme of improvements to its systems, the Department had made significant efforts to improve its asset tracking ability, its management of materiel in transit and the robustness of its associated communications structure. For example, the Department was now able to track 93% of the equipment delivered into the Iraq theatre of operations through to the point of final consumption. Further improvements were needed, however, and these would be introduced over the next three to four years. The planned improvements included increasing the resilience of the system, since it was purchased as a civilian off-the-shelf solution and lacked the necessary robustness for deployed military operations. The system was also somewhat inflexible, and needed to be fully linked to appropriate inventory and accounting management systems.[35]

30. Work to improve asset tracking comprised enhancements to both the Department's consignment tracking capability and its inventory management systems. To date, the Department had spent some £18 million on consignment tracking and around £6 million on inventory management. Over the three years from 2006-07, it planned to spend a further £8.5 million on consignment tracking and around £45 million on inventory management. These costings excluded the new Skynet 5 satellite system, which was being procured by the Department to support a wide range of defence activities, including providing sufficient bandwidth for asset tracking communications. The Department considered that it had made significant improvements to its capability in this area at relatively low cost.[36]

Defence Logistics Transformation Programme

31. The Defence Logistics Transformation Programme was central to the way in which the Department was addressing the issues of reduced levels of stocks and cannibalisation. The Programme covered all Defence logistics activity and aimed to deliver savings of around £2 billion by 2010-11.[37] The Department acknowledged that recuperating from Operation TELIC and continuing support to current operational commitments above the recommended levels set by Defence Planning Assumptions was straining logistic support and had, inevitably, led to some shortages. The drive for savings engendered by the Programme had not contributed to this position. Rather than posing further significant risks to readiness, the Defence Logistics Transformation Programme was intended to move towards an era of efficient delivery of effective logistics support.[38]

32. The Department was confident that it would achieve the level of savings predicted and said that it had already identified savings worth £1.5 billion. The Defence Logistics Transformation Programme aimed to make savings by improving efficiency and effectiveness as well as by reducing budgets. Principally, these improvements would be achieved by, for example, closer partnering with industry and by contracting for availability, not spare parts. This should reduce the costs of support and maintenance, lead to faster turnaround times within repair loops, and raise the availability of a range of equipment such as aircraft and armoured vehicles. Under these arrangements, the Department had adopted more efficient repair and maintenance procedures for Harrier aircraft and increased the number of available aircraft by 12 from within the same total fleet size. It was, therefore, possible to sustain or even increase frontline availability, thereby improving readiness, whilst achieving savings within the maintenance pool. Closer partnering with industry will also be a feature of new equipment programmes, including the introduction of the future aircraft carriers, the precise timing of which remains uncertain.[39]

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16    C&AG's Report, paras 2.5-2.6 Back

17    ibid, para 2.41; Q 61 Back

18    Qq 40, 44-45; Ev 21, 22 Back

19    Qq 9-10, 63-64, 66-67 Back

20    C&AG's Report, paras 2.44-2.45; Q 9 Back

21    Q 10  Back

22    C&AG's Report, paras 2.8-2.9 Back

23    Qq 11, 90 Back

24    Qq 15, 91 Back

25    Qq 14, 90, 96 Back

26    Q 87 Back

27   C&AG's Report, para 2.24 Back

28    Q 27 Back

29    Qq 25-26, 28, 85, 98 Back

30    C&AG's Report, para 2.28 Back

31    Qq 28, 30-32 Back

32    Qq 83, 85-89 Back

33    Qq 86, 88 Back

34    Qq 83, 85, 102 Back

35    Qq 89, 102-104  Back

36    Qq 103-105; Ev 21 Back

37    C&AG's Report, paras 2.46-2.47 Back

38    Qq 16, 97 Back

39    Qq 16-18, 20, 97 Back

 

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Prepared 28 February 2006