Select Committee on Defence Sixth Report


Keeping the DIS relevant

94. Defence is an ever-changing world. The tasks which our Armed Forces undertake are varied and new technologies offering more effective capabilities are constantly emerging. There is a need to ensure that the assumptions and proposals in the DIS remain relevant. We asked whether the assumptions and proposals in the DIS had been changed or revised since its publication. Lord Drayson told us:

95. It is important that the MoD, working with the defence industry, ensure that the assumptions and proposals in the DIS remain relevant. We note that the MoD plans to review the DIS at the end of 2007, two years after it was published. As the DIS is the Government's Strategy, we also look to other Government bodies, particularly the Department of Trade and Industry and the Treasury, to review the DIS to ensure it remains relevant.

Embedding the DIS

96. Lord Drayson has given the impetus to both producing the DIS and pushing forward its implementation. Some concerns have been expressed by industry that the implementation of the DIS is dependent upon Lord Drayson's personal involvement and it could suffer if he left post.[133] We asked Lord Drayson whether the culture of change he was trying to implement would survive when he was no longer the Minister for Defence Procurement. He considered it his responsibility to embed the changes and was optimistic that it could be done. He told us that:

    To deliver the results, what needs to happen is there has to be continual reinforcement of change within the Department and change within industry to deliver better performance…. The challenge for next year [2007] is to embed that: both embed that within the Department and embed it within industry, and to bring those sectors which have not come on board to the degree we would have liked up to speed.[134]

97. Some companies are concerned that the internal MoD changes might be hindered by the MoD's culture, and that the commitment to the implementation of the DIS was not reflected at all levels and across all organisations within the MoD.[135] Lord Drayson acknowledged that there was resistance from MoD staff, but he expected that. He told us that "what one has to do is show leadership; one has to understand the causes of the resistance to change and put in place the necessary actions to get it done despite the natural organisational resistance". As part of the work to produce the Enabling Acquisition Change report, an analysis was undertaken of past change programmes to see which ones had been successful and which had not been successful. One of the conclusions from this work was that unsuccessful change programmes had not been embedded in the culture and in the behaviours of the Department.[136]

98. The Minister for Defence Procurement is confident that the changes being introduced will be permanent, but this remains to be seen. We look to the MoD to ensure that the changes being implemented as a result of the DIS are fully embedded so that they deliver the expected benefits.

Funding the DIS

99. There is concern in industry about funding and whether the required funding for the DIS to be successful will be made available. In its written submission the SBAC noted that:

100. The MoD informed us that "DIS implementation costs within MoD are estimated at being £23 million in the current financial year, and some £30 million for the coming financial year". These costs cover the teams which are taking forward sector implementation, the specialist legal and financial advice supporting those teams, and the initial costs of the Defence Acquisition Change Programme. Budget holders within the MoD have found these costs within their existing budgets. The MoD considered that "set against the £18.2 billion of contracts that MoD placed during the last financial year, this is a small investment for the future with the potential for major payoff".[138]

101. The MoD's estimate of the cost of implementing the DIS does not include the cost of funding the equipment programme. Lord Drayson said that, once the outcome of the Comprehensive Spending Review (CSR) was known, the MoD would be able to provide further clarity and transparency to industry. Providing this clarity and transparency was an objective for the end of 2007. He acknowledged that the CSR "has an effect on everything", but would not make any comment on what the outcome might be or the impact of "any settlement on any particular decisions; because those decisions have not been taken and the settlement has not been resolved".[139]

102. We asked the MoD whether the funding needed to support current military operations would reduce the funding available to implement the DIS. The MoD told us that:

    Funding to support operations should not affect DIS implementation although operational experience often drives future equipment requirements which may become part of the DIS. MoD attaches priority to operational needs, but recognises the need to strike a sensible balance between short term needs and the long term sustainment of an efficient and competitive industrial base.[140]

103. The MoD estimates that the costs of implementing the DIS in 2006-07 and 2007-08 will total just over £50 million. However, these costs only cover the MoD internal costs, and do not include the costs which will be incurred in the move away from competitive procurement in many areas, and from sustaining technological and industrial capabilities in the UK. We look to the MoD to estimate the overall costs of implementing the Defence Industrial Strategy.

104. The DIS has, in the MoD's own words, the potential for "major pay-off". However, to realise the pay-off, the required funding must be made available to fund the future equipment programme. We would consider it a real missed opportunity if adequate funding for the MoD to realise the full benefits of the DIS were not provided. We plan to take a close interest in the outcome of the Comprehensive Spending Review.

Measuring whether the DIS delivers

105. In our first inquiry into the DIS, Lord Drayson told us that he was "in a hurry to show in 2007 that this has made a real difference to our defence capability and the strength of our defence industry".[141] We asked how the benefits and improvements expected to flow from the DIS would be measured and what indicators the MoD would use to check whether progress was being made. Lord Drayson considered that:

    asking the Armed Forces: "Can you see the evidence of improvement?" ask the industry: "Do you feel you are given a framework" (which is, I think, really the Government's responsibility) "within which you can make business decisions which allow you to fulfil the needs that the Ministry of Defence has, more effectively?"…. Also, I think, in terms of embedding the change, asking the military and the civil servants within the Department who are responsible for procurement: "Does it feel different to you? Has there been the achievement of significant change in the way in which things are done?"[142]

106. The MoD plans to assess whether the DIS is delivering the expected benefits by asking the Armed Forces, the defence industry and MoD staff whether they can see improvements or a changes in the processes. We welcome such an approach and look to the MoD to ensure that this is undertaken on a regular basis and represents a representative cross-section of different ranks, grades and company sizes. However, we also expect the MoD to continue to measure its performance in procuring equipment to cost, time and quality and to develop metrics to measure its success in managing equipment on a through-life basis.

DIS checklist

107. We asked Lord Drayson whether there would be a DIS checklist for 2007. He told us that the MoD was producing the checklist for 2007 and this would be forwarded to us.[143] We received the checklist on 29 January 2007. We note in particular that the MoD expects to

  • agree a route map to a Long Term Collaboration Agreement between the MoD and key Industrial Partners covering full submarine life-cycle by Summer 2007;
  • achieve industrial restructuring for surface ships which delivers potential cost improvements across the maritime programme by Summer 2007;
  • reach a firm decision on the viability, shape and scope of the proposed LTPA [Long Term Partnering Arrangement for the Fixed-wing aircraft sector] by the end of 2007 and be positioned to place relevant supporting contracts as appropriate; and
  • publish R&D Business Models for Investment by Autumn 2007.[144]

We plan to continue to monitor the progress in implementing the DIS and whether the expected benefits are delivered, and will use the MoD's checklist for 2007 as the basis for doing this.

132   Q 3 Back

133   Ev 25 and RUSI Report, The Defence Industrial Strategy: An Analysis of Industry Responses, 5 October 2006, Executive Summary, p 4 Back

134   Q 2 Back

135   RUSI Report, The Defence Industrial Strategy: An Analysis of Industry Responses, 5 October 2006, Executive Summary, p 3 Back

136   Q 9 Back

137   Ev 23 Back

138   Ev 36 Back

139   Qq 66-67 Back

140   Ev 37 Back

141   HC (2005-06) 824, Q 289 Back

142   Q 11 Back

143   Q 4 Back

144   Ev 40-43 Back

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