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I spent 20 years working in the defence manufacturing industry, and I have been a member of project management teams on major defence platforms. I know only too well that current projects are far more complex than Vanguard was. We should also remember that safety and regulatory standards have been raised in the 25 years since Vanguard was procured. Because of my experience in defence industry and the time that I spent on the Public Accounts Committee, I am only too well aware that British defence procurement does not have a very good track record. Given the long time scales involved we do not always learn the lessons quickly enough for them to have an impact on our new projects. It is to be hoped that the replacement of Vanguard will not suffer from
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legacy problems, but will benefit from the new proposals in the defence industrial strategy.

Our defence industry is in a period of tremendous change. In this climate, getting public sector procurement right is difficult. The defence industrial strategy has been a major step forward in redefining the relationship between the MOD and industry, and it will deliver huge benefits in getting the right product to the front line, on time and on budget, and in maintaining that product during its operational lifetime.

I am old enough to remember the old relationship between the MOD and industry in the days of cost-plus. The MOD decided what it wanted and chose a supplier; the supplier told the MOD how much it would cost to build; the MOD sent in an auditor to check the costs, added a percentage for profit and that was the price that was paid: very cosy, but hardly cost-efficient and not value for money. So we moved on to fixed-price contracts and competition, where suppliers were pitted against each other to deliver the product at the lowest possible cost. Yes, it drove the price down, but there was a danger that, to secure the contract, suppliers would have to accept prices below the cost of manufacture and risk being unable to sustain long-term production, or ratchet up the price for product support, leading to higher costs over the life of the product. That is why I welcomed the defence industrial strategy’s emphasis on a partnership approach and the recognition that there needed to be changes in the approach both of industry and of the MOD.

The MOD needs to move to a through-life relationship with industry, to define a project not in terms of a product, but in terms of an outcome, and to have the ability to be flexible within a project to meet changing demands across a long life cycle. In my days on the Public Accounts Committee, time and again in our reports we highlighted a lack of project management skills in government, and nowhere was that more apparent than in the MOD’s major projects.

Industry needs to change too. It has to stop looking at the MOD as a customer to squeeze cash out of or a source of easy money, and to start seeing it as a genuine partner. It has to be willing to share the benefits of lean manufacture and cost reductions in return for the security of a long-running relationship.

None of this is rocket science, Mr. Deputy Speaker, and I could point you to an example in my own constituency where just such a partnering relationship exists—between the MOD, VT Shipbuilding and Fleet Support Ltd. Fleet Support delivers ship support and is seen by many to be the benchmark industry partner. It has developed an innovative joint working relationship with the MOD that has already delivered over £50 million of savings. VT Shipbuilding houses the UK’s most modern and productive shipbuilding facility. So we have the defence industrial strategy in action, delivering cost savings. Where might that be? It is at Portsmouth naval base—yet another reason it should remain open.

As I said before, there is a litany of MOD major projects where we can see where it all went wrong, but I hope that we are starting to learn the lessons from past mistakes and I want to illustrate that briefly with an example—that of Bowman. I am sure that hon. Members will be aware of the Bowman system. It is not just a radio but a complete tactical system delivering
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secure digital voice communications. It is a complex and technically demanding programme, involving the conversion of some 15,700 land vehicles, 141 naval vessels and 60 helicopters, as well as training some 75,000 personnel. As a consequence it involves many different and complex interrelationships between stakeholders in the Department, the armed forces and industry.

We can see in the recent report from the Public Accounts Committee where the Bowman procurement process went wrong. The summary to the report states:

There then follows a litany of the failures: not surveying the state of the Army’s vehicle fleet; underestimating support costs; examples where the equipment met the requirements of the contract, but not of the user; and the failure to appoint a senior responsible officer right at the start with the responsibility, funding and authority to deliver the programme. Is it any wonder therefore that the development of Bowman suffered such serious delays?

To be fair, in 2001 the MOD recognised that it was no good trying to patch things up with the original supplier and re-competed the contract, which was won by General Dynamics. That has proved to be a valuable partnership; indeed, it has been commended by the National Audit Office. Bowman is now delivering vital capabilities to soldiers on the ground. In a recent article in Jane’s Defence Weekly the NAO director Tim Banfield spoke about the Bowman programme. He put in a nutshell why we had so much difficulty with it. He said that it was a typical example of how the old-fashioned linear approach simply would not work in these days of rapid leaps in technology and the consequent changes in the needs of the user. He went on to say that because of the partnership working between the new contractor and the MOD integrated project team, Bowman, despite its “long and troubled history” and the fact that it is “still getting a bad press”, was

Mr. Kevan Jones: Does my hon. Friend agree that what has been achieved in a short time is a first-rate system, which is working in Afghanistan, as I saw last week, and other places around the world? Does she also agree that when people are commenting on Bowman they should not mix up the history of the mistakes that were made with what is now a very good piece of equipment? The recent comments of the hon. Member for Gainsborough (Mr. Leigh) concentrated on that history rather than on the facts now.

Sarah McCarthy-Fry: I thank my hon. Friend for his intervention. He is absolutely right. My point is that we should use the history to learn lessons so that in future we deliver. Out in the field, as he said, the feedback is very positive. In Iraq, Brigadier Andrew Gregory said:

Brigadier Patrick Marriott said:

We can look forward in 2007 to new kit that will enable Bowman to interface with other UK armed forces
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communications systems. In the field that means that a brigade commander can easily share information. We are also looking at new battery technologies that mean that we will be able to offer a much more powerful, lighter version.

It is very easy for us always to criticise when things go wrong—maybe because things so often have gone wrong in major defence procurement projects—but let us celebrate the successes too. In the same article in Jane’s Defence Weekly, Tim Banfield said that there are “lots and lots” of successful UK defence projects, but the MOD was “not very good at celebrating”

those successes. If we can achieve an honest and open relationship between the MOD and the defence industry—a true partnership—hopefully we will have more of the successes and fewer of the problems.

I was a member of the Public Accounts Committee when it held an evidence session on Bowman, and I asked Bill Jeffrey, permanent secretary at the Ministry of Defence, about the new partnership with General Dynamics:

He replied:

That concept of acquiring capability rather than a product must be the benchmark for future acquisition, and capability must be driven by the operational requirements of our armed forces.

A few months ago, there was a report in Warship World about potential reductions in the numbers of ships and about putting ships into reduced readiness, and I was quoted in my local paper as saying that I was “not hung up on numbers”. That was misinterpreted to mean that I was happy to see big reductions in the numbers of ships, which is absolutely not the case. I am glad to have the opportunity to set the record straight today. We cannot consider the number of ships in isolation; we have to consider capabilities as well. More importantly, it should not be the number or the capability of ships that drives our defence strategy. Rather, we should set out clearly the role that we expect our Royal Navy to undertake, and then provide the right number of ships with the right capabilities to achieve the role.

The First Sea Lord, Admiral Sir Jonathon Band, has made it quite clear that we need the new carriers to meet the operational requirements of the Royal Navy. I am grateful to my right hon. Friend the Minister of State for once again reiterating the Government’s commitment to the carriers. I want the acquisition of the carriers to be one of the Ministry of Defence’s success stories, and an example of genuine partnership between the MOD and industry. In Portsmouth, we eagerly await the announcement of the orders for those ships, not just because we hope to play our part in building them, and not just because we can demonstrate a track record in partnership working, but because we believe that Portsmouth naval base is the only feasible home port for the ships.

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Mr. Brian Jenkins (Tamworth) (Lab): I am listening intently to my hon. Friend’s valuable contribution, but my difficulty is this: how does the new partnership working differ from cost-plus? Where will the pressure for innovation come from, if there is no competition between companies? How will we ensure that there is pressure to make sure that what we want is delivered by our partner, because it will have no incentive to be innovative?

Sarah McCarthy-Fry: The incentive to be innovative will come from the contract, which says that in return for a long-running relationship over the life of the product, the partner will deliver cost savings to the MOD, through the savings that it makes by driving down costs, by bringing about cost reductions and by ensuring lean manufacture. What happened in the past under the fixed-price system was that if the price went down, and the company made cost reductions and used lean manufacture and new ways of working, the company got all the cost savings, and nothing went back to the MOD. Risk-sharing and benefit-sharing are the benefits that will come out of the system of partnership working. I will not miss this chance to make my final point about Portsmouth naval base: it must be the home port for the carriers, and that adds weight to the argument that we must keep the base open.

2.3 pm

Bob Russell (Colchester) (LD): I start by joining the Minister of State in expressing condolences to the families of those members of Her Majesty’s armed forces who lost their lives in recent weeks. I also join him in paying tribute to those who, less recently, lost their lives in Afghanistan, Iraq and Northern Ireland. Nor should we forget the many men and women across the armed forces who have been injured while in service, and who have worked tirelessly. I also wish to put on record my appreciation for the work done, day in, day out, by members of Her Majesty’s armed forces in the Royal Navy, the Royal Air Force, the Marines and the Army.

As far as defence in the UK is concerned, clearly we cannot ignore Iraq; the war is arguably illegal, ill-planned and expensive. The Liberal Democrats are the only party represented in the Chamber today to have voted against it, but even we did not anticipate the drawn-out and continually alarming fallout from the ill-advised backing of President Bush’s shock-and-awe misadventure. Quite apart from the awful cost of life to our service personnel, other armed forces in Iraq and the civilian population, there is the cost to the British taxpayer to consider, which is about £24 million a day. That price needs to be remarked on, because that money could well have been spent on other, certainly better, things.

It is generally accepted, although not by those on the Government Benches, that there is overstretch. My concern is that the military covenant must be safeguarded, and even if it has not already been affected, there is a real danger that the continuous overstretch will undermine it. The impact of the Iraq war and our intervention in Afghanistan is taking its toll on the troops. It is important that troops feel valued and supported in their missions, and on their return. Our soldiers are the backbone of our fighting
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forces. The Government need to prioritise the welfare, fair treatment and conditions of service of those soldiers. Regiments and individual soldiers are being asked to do too much too often, without proper regard being paid to their welfare needs. Harmony guidelines have been consistently broken.

The Chief of the Defence Staff says that the armed forces are “very stretched”. However, last month in the House, the Secretary of State for Defence said in reply to a question:

I think that we may be playing with words, here. Many in the armed forces believe that “overstretch” is the best description.

Our current operational commitments in two theatres exacerbate the problem of overstretch and have a detrimental impact on recruitment and retention. There is an imbalance between current commitments and manning levels. It can be recognised that many members of our armed forces are still not paid sufficiently, given the hours and the work that they put in. Indeed, when they are working on an operation, the number of hours that they work means that they are on the equivalent of less than the minimum wage. It is essential to ensure that there are attractive packages available to our armed forces if we are continually to attract people to join the forces, and if we are to retain them.

About 10 per cent. of people in the British Army are not British. They come from 57 different countries, predominantly Commonwealth countries. We have already heard mention today of the contingent of South Africans, particularly those in the Army. I know that there are many in 16 Air Assault Brigade in Colchester garrison, too. I ask the Under-Secretary to give us further clarification before the day is out. I know that there has been an intervention and an answer on the South African question, but it is a crucial issue that must be addressed more firmly than it has been so far.

To go back to the huge number of non-British people serving in the Army, in one sense we should welcome that recruitment. Is there a cap, either official or unofficial, on the number of people from outside the United Kingdom who are recruited, and what percentage of the Army could be made up of non-British people from overseas before the Under-Secretary felt that the ethos of the Army had been affected? I do not necessarily mean that it would be affected negatively, but that it would cease to be what it has been hitherto. We also need to address issues such as accommodation—I shall come on to that later—mental health and care support. All of those feed into the recruitment and retention rates. It is not an isolated issue and it must be addressed as part of wider measures across the armed forces.

I praise the Government for the Veterans Agency and the work relating to it. In particular, the veterans badge has been warmly welcomed by people of all ages who formerly served in Her Majesty’s armed force. They welcome the opportunity to wear in pride a badge that shows that they served, at some time, in Her Majesty’s armed forces—indeed, in some cases, in His Majesty’s armed forces.

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Much important work relating to veterans issues was carried out by the voluntary sector, the Ministry of Defence and others before the veterans initiative was set up, but many of those areas of activity have been enhanced by Government Departments working in co-operation with the voluntary sector under that initiative. Among the many voluntary organisations involved, I single out the Royal British Legion—a wonderful umbrella organisation—but there are many other voluntary organisations and charities in the wider military family. The ministerial-level veterans taskforce has addressed issues of interest across government, which is to be welcomed, and the veterans forum is tackling specific issues that affect some veterans. The Department of Health, for example, is leading on long-term care for older people and the provision of treatment for mental health conditions, and the then Office of the Deputy Prime Minister led on homelessness. Assisting ex-service personnel and their families to make a successful transition to society is another important service.

Mr. Kevan Jones: Does the hon. Gentleman agree that something that the Veterans Agency, the Ministry of Defence and the Government must look at is the number of ex-servicemen who end up in prison? I was shocked the other day by a letter that said that the Government do not know how many ex-servicemen are serving a prison sentence. Does he think that we should look at that to see whether the cause is possibly related to military service, which has led to those people being in prison?

Bob Russell: I welcome the hon. Gentleman’s intervention. It is an interesting idea, but I have to confess that it is not something that I have any knowledge of. It is something on which the Ministry of Defence and the Home Office, as long as it retains the Prison Service brief, must liaise, because it is a valid point. Perhaps it does not relate to the issue that I was discussing, which was the successful transition to society of people leaving Her Majesty’s armed forces, but I accept that some of those transitions end up with another Government department—Her Majesty’s prisons.

The armed services already provide comprehensive resettlement support for the majority of personnel leaving the forces to rejoin civilian life but, for various reasons, some personnel are not entitled to that support, so the need to identify and assist those in the group who are most at risk must be addressed. If the Government acted on the hon. Gentleman’s concern, that could well bring in those who drift and end up in the criminal justice system. Homelessness and rough sleeping are a serious problem among ex-service personnel, quite a high number of whom end up on the streets, although the exact figures are not available. That is something that the Government should look at, and I should like to draw the attention of the Minister and of the House to early-day motion 664, which marks the 75th anniversary of the Ex-Service Fellowship Centres. It congratulates

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