Examination of Wintesses (Questions 80-99)
VICE ADMIRAL
TIMOTHY LAURENCE
MVO, ADC, MR DAVID
OLNEY, MR
BILL CLARK
OBE AND MR
MIKE MARTINDALE
15 MAY 2007
Q80 Robert Key: They set the rules?
Mr Martindale: Yes, the Government
set the rules.
Q81 Robert Key: Perhaps we should
be inviting the Treasury to give evidence as well? Could I turn
specifically to another area which affects all accommodation,
and that is Project Aquatrine which is a huge project but it so
far is having an enormous problem because, for example, in terms
of water provision you did not know the actual consumption of
you the customer when you did the contract, when you started four
years ago when the contract was signed up. I think I am right
in saying one of the big problems was that Ministry of Defence
establishments had no idea how much water they used, therefore
how much was leaking, therefore how much you should pay the new
contractors under Aquatrine, and what progress you are making
there?
Vice Admiral Laurence: Probably
David Olney is the best person to answer that. You rightly highlight
a problem which is, establishing a base line before going into
these contracts is very important but also extremely difficult.
One of the reasons why we established these contracts is because
we do not have a very clear grip, or we did not at the time, of
what consumption and maintenance standards were in these areas.
David, could you expand on that?
Mr Olney: I think what we are
doing with Aquatrine, as you say, is putting a considerable investment
on the private finance, because it is a PFI. The three consortia
are putting considerable effort into putting additional meters
into our Estates so we can substantially reduce the leakage rates.
I do not have the figures with me but I know for arguments sake
we have made considerable inroads into leakage rates on the Estate.
Q82 Robert Key: That is clearly something
for the future. There is one other aspect of this that I think
is very important. When it comes to the disposal of surplus assets
can you confirm that one of the real problems you face is that
there is an absence of electrical health and safety certification
in most of the Ministry of Defence Estates because you never had
to conform to national standards and, therefore, selling on to
the private sector is a dodgy business without any safety certification?
Mr Olney: Are we referring to
the Aquatrine?
Q83 Robert Key: No, I am moving on
from Acquatrine to the general issue of selling surplus property
which does not have certified electrical circuitry and provision.
Mr Olney: There may be an instance,
I cannot say, where that does not take place but the vast majority
of assets which we own, whether we dispose of them or use them
ourselves, will have the appropriate statutory and mandatory inspections
and work done on them. We certainly do comply with health and
safety. Indeed, one of the main advantages of moving to our recent
prime contract initiative has been to improve our record in health
and safety. I can assure the Committee that the Estate is in a
very, very good health and safety conscious condition.
Q84 Robert Key: Have you had any
difficulties though with getting electricity companies to accept
responsibility for properties which are provided wired to Ministry
of Defence standards?
Mr Olney: I am not aware. I am
not aware.
Q85 Robert Key: Then things have
changed, and I am glad to hear it! Your total budget is about
£3.3 billion a year—something of that order. Is that
right?
Mr Martindale: The NAO have estimated
the expenditure on the estate to be around £3.3 billion but
Defence Estates is much smaller than that. Of course, that budget
includes the cost of capital and depreciation charges on the asset
base which the Ministry of Defence owns. So our budget is round
about £1-£1.5 billion in Defence Estates.
Q86 Robert Key: What proportion of
your budget is tied up in PFIs or PPPs?
Mr Martindale: £100 million
of our budget, so less than 10%.
Q87 Chairman: Can we move on to the
Housing Prime Contract. Can you tell us, please, how it works
and how does it tie in with the Annington Homes Deal?
Vice Admiral Laurence: Again,
I think you will get a more accurate answer if I ask David Olney
to answer that, in terms of the practicalities of how it works.
Mr Olney: In practical terms,
the Housing Prime Contract is there to react to householders'
calls to maintain their living standards in their house. It provides,
also, the ability to upgrade houses if we inject additional money
into it, and it provides the ability—again, if you put money
into it—to provide long-term, life-cycle maintenance of
the house. What do I mean by "life-cycle"? I mean as
assets come to the end of their life we replace boilers, we undertake
decorations and we will renew and replace kitchens. So there are
three main constituent parts of the MHS contract: reactive maintenance,
life-cycle repair (the sort of things you and I would do on our
houses—painting and decorating, replacing new kitchens)
and upgrading houses to a high standard.
Q88 Chairman: How does it tie in
with the Annington Homes Deal?
Mr Olney: It does not tie into
the Annington Homes deal at all; it is simply the mechanism we
use to maintain our estate in England and Wales. We use that mechanism
to maintain property in England and Wales which we own ourselves,
because there are still some, as well as the Annington-owned and
leased back houses.
Q89 Chairman: In the MoD memorandum
there is a rather more favourable outline of how it all has been
working out than was produced by the NAO report in March. Do you
accept that there were difficulties, delays and problems which
caused some serious concern to service families? Why is there
a discrepancy between the NAO report and the way that the MoD
memorandum paints the picture of the Housing Prime Contract?
Mr Olney: I certainly do accept
that the Housing Prime Contact got off to a pretty terrible start.
What I would say is that if you were to now look at the performance,
some six to nine months later, we have markedly improved that
performance. As of this week, for argument's sake, on the help
desk, whereas at the start we were answering some 50% of calls
within two minutes, that is now 99% of calls answered within two
minutes. If you were to look at our emergency, we have three standards
of call-out, and we achieved 99% of emergency repairs within the
time.
Q90 Chairman: So there is obviously
an improvement.
Mr Olney: A marked improvement
over the last nine months.
Q91 Chairman: So what lessons have
been learnt from how it went wrong in the first place?
Mr Olney: That is a good question.
Why did it go wrong? Then we can answer the lessons. Why did it
go wrong? One, there was, clearly, a higher backlog of work than
we had calculated. It is clear, also, to say that as the old contracts
were running out people were saving up work waiting for the new
contract to take place, and kick in. Secondly, the IT systems
which the contractor put in were not up to speed quick enough.
Thirdly, the organisation of a supply chain was not as slick as
we would have liked, and I think we underestimated the extent
to which you can mobilise such a large housing contract nationally.
Clearly, this company maintains local authority and housing association
houses elsewhere round the country, so we looked carefully at
that. Those were the main reasons for the disastrous start. One
of the lessons we have learned, clearly, is to look more carefully
at the backlog, which we will do in future; secondly, to ensure
that we have really slick IT systems in place beforehand and,
lastly, to make certain that the supply chain is far more effective.
I would say on the supply chain that, of course, originally we
had some 50 different contracts maintaining the housing stock
and, with TUPE, to mobilise and re-energise that supply chain
in such a short period of time was also a big issue. We have learned
a lot, and indeed in learning that is how we have managed to improve
the service to families and householders so much.
Chairman: It is very refreshing when
people come before us and say that they have had a disastrous
start. It would be helpful if MoD memoranda were phrased in that
sort of language so that we could know in which direction it might
be most helpful for us to focus, but thank you for accepting that
and for setting out how it is that you are progressing these issues
because they are very important. Moving on to Training and Exercise
Areas.
Q92 Mr Holloway: You said there was
a change to working with Landmarc for training areas. How has
that worked out so far and what sort of problems have there been,
if any?
Vice Admiral Laurence: Again,
I think we are overworking David but he is the expert on these
operational areas. David, if you would not mind saying how it
is going.
Mr Olney: Yes, the Landmarc contract
transferred to Defence Estates in April 07 (it was previously
run by the Army) and I have to say it is working extremely well.
The quality of food has improved since its inception; I think
we have delivered over four million meals—a considerable
number of meals. Its management of the estate is working well.
We are looking now to see whether we can improve, clearly, and
to transfer more risk to them, as part of our work to drive more
efficiencies and effectiveness out of the system. It is an example
of a contract which is working well.
Q93 Mr Holloway: What are the implications
vis-a"-vis the drawdown of troops from Germany into training
areas within the UK?
Mr Olney: That undoubtedly will
put pressure on training areas in the UK, and it is a piece of
work that we are doing with, in fact, all frontline services to
look at the implications of that. The work we are doing is trying
to match better the supply and demand of the training estate—ie
as we draw down, what will be the future demand? Clearly, if you
are going to bring troops back from Germany, places like Salisbury
Plain will come under increasing pressure as to managing in a
sustainable way.
Q94 Mr Holloway: Will there be implications
for the Air Transport Fleet, for example, in increased use of
Batus. Will we still be using, for example, the sort out training
area?
Vice Admiral Laurence: Strategically,
we have got a number of difficulties to contend with. The fact
is we cannot, on the mainland UK, do major formation exercises;
we have to do that overseas. We will need to look at the areas
that we use for the units in Germany at the moment to see if,
when the units eventually come back to the UK, we can hang on
to the training facilities there, perhaps. That might be another
way of doing it. You are absolutely right; this is going to bring
some strains to the system.
Mr Olney: It is certainly one
of the considerations. We talked about earlier all the work we
are doing on looking at bringing troops back from Germany. It
is certainly an important factor, as to where they will train
and what are the impacts on training land.
Q95 Mr Holloway: Finally, what will
happen to, physically, the ownership of the training estates after
you have had the Defence Training Review? Will it remain with
the MoD or will there be some newer type of arrangement?
Mr Olney: That does not change.
Mr Clark: A change is made to
the Defence Training Estate.
Vice Admiral Laurence: It will
affect some of the training establishments. For example, St Athan,
which will be the main centre, will be under a different arrangement
but the actual rural training areas will not be involved in that.
Q96 Mr Jenkins: On the exercise areas
mainly, in the last few years have we noticed a downturn in demand
for people applying for exercise areas and training areas?
Vice Admiral Laurence: Downturn
in demand by service units or by—
Q97 Mr Jenkins: By units, I presume.
Yes, service units.
Vice Admiral Laurence: I do not
think so. I do not think there has been a general downturn in
the use. Obviously, when a number of troops are deployed overseas,
when they are overseas they cannot use the UK bases, but there
is a great deal of training and preparation for overseas deployments.
I do not think the general level of training has decreased.
Mr Olney: Indeed, our training,
as the Vice Admiral has said, in support of operations is the
highest it has ever been for a long, long time. Key parts of our
training estate are heavily used.
Q98 Mr Jenkins: I am trying to clarify
something in my own mind because we have been told, on a number
of occasions that due to the operational tempo—the turnover
in overseas demand—we are doing substantially less training,
and this has had a knock-on effect. If we are doing substantially
less training, where are we doing that substantially less training,
because you have got more—
Vice Admiral Laurence: No, it
is a very valid question. Very often the first things that are
cut are overseas exercises that we might have planned bilaterally
with other countries: the Navy exercising with the United States,
the Army travelling to do some exercises in the Caribbean, or
something like that. Those tend to be the first ones to go, partly
because of the time involved and the pressure on the transport
fleet and partly because of the cost. The central basic training
in the UK, both for individuals and for units, tends to remain
at pretty much the same level.
Q99 Mr Jones: Can I turn to defence
rationalisation of the Estate. Clearly, in trying to manage any
type of estate there is stuff that becomes surplus to requirements
and, also, refiguring the estate to get the best operationally.
Is there a logical end-point to this review of estates? Would
you tell us a little bit about where you are with it at the moment?
Vice Admiral Laurence: It is an
interesting question because, normally, when one sets off on a
rationalisation programme you want to know where you start and
you want to have a clear end-state. I suspect there will be an
element of continuous change about the Defence Estates. I suspect
that by the time we have reached what looks like the end-state,
at the moment, we will find we want a different end-state. Certainly
in my vision for the future of the Estate I see more of the super
garrisons that the Army wants to create, perhaps establishing
that pattern across the country; the RAF are reviewing their bases
and they, too, want to rationalise and want fewer core, major
airfield sites, and the Navy has a big decision to take about
the number of naval bases that it wants, and a slightly smaller,
but nevertheless important, decision on the number of training
establishments that it wants. I see that, overall, the number
of sites will decrease, the size of sites, in general, will increase,
but that is a general picture of how I see it moving over the
next 10 to 20 years.
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