Conclusions and recommendations
1. We
congratulate the DPA on achieving its Key Targets and the MoD's
Public Service Agreement Target for Acquisition in 2005-06. (Paragraph
8)
2. We
are pleased to see that the MoD is getting a better grip on programme
time schedules. Off-the-shelf procurement, where available, can
reduce the risk of programme time slippage. We look to the MoD
to ensure that project teams are made aware of the lessons from
the off-the-shelf procurement of the Javelin medium range anti-tank
guided weapon, as this appears to be a good example of the benefits
which can be delivered from this procurement route. (Paragraph
13)
3. While
cost growth on defence equipment projects in 2005-06 was below
the target, we have concerns that the main reason for this was
reduction in the quantity of equipment ordered. Trade-offs between
cost, time and performance are part of the Smart Acquisition process,
but we expect our Armed Forces to receive equipment in the numbers
required and with the capability to do the task required of it.
Meeting Key Targets should not be given priority over meeting
the requirements of our Armed Forces. (Paragraph 17)
4. We
are concerned to hear that, in the current financial year, potential
cost increases on the Astute submarine and Type 45 Destroyer programmes
are putting pressure on the DPA's Key Target covering cost growth,
and that the Key Target covering asset deliveries is at risk.
We look to the MoD to monitor performance closely against these
two targets, and to seek to limit potential further cost growth
on the Astute and Type 45 programmes. We will also be looking
closely at the Major Projects Report 2006 to ensure that the cost
increases on these two programmes are not symptomatic of wider
problems within the MoD's procurement process. (Paragraph 18)
5. Work
to merge the Defence Procurement Agency and the Defence Logistics
Organisation is underway and, on current plans, the new organisation
will begin operating on 2 April 2007. The MoD is managing the
merger as a project with four phases and target dates for the
completion of each of these phases. Given the importance and scale
of the merger, we recommend that the MoD provide us with quarterly
progress reports. (Paragraph 24)
6. A
key objective of the new Defence Equipment & Support organisation
is to improve the management of acquisition on a through-life
basis. We are pleased to learn that there will be new targets
to measure the performance in this area and a target covering
how quickly the new organisation responds to the needs of our
Armed Forces. Given some of the substantial cost increases and
time slippage experienced by some equipment programmes in the
past, we expect the MoD to continue to monitor its performance
at procuring equipment to time, cost and quality, and for the
performance data to be published on an annual basis as it is now.
Otherwise, there is a risk that poor procurement performance could
be buried in long-term project management data. (Paragraph 26)
7. The
success of the Defence Equipment & Support organisation will
depend on whether the new organisation has the staff with the
required skills to improve Through Life Capability Management
and provide more agility in responding to the needs of the Armed
Forces. Much work is being undertaken to identify the current
skills gaps and to address these through training or external
recruitment, and we welcome this. It is essential that the MoD
commit the investment required to address the skills gaps identified.
(Paragraph 31)
8. We
recognise that collocating the Defence Logistics Organisation
with the Defence Procurement Agency is a sensible step, given
that the aim of the merger of these two organisations is to improve
Through Life Capability Management. The merger will result in
a substantial number of job losses and the collocation will have
a major impact, particularly on those who work for the Defence
Logistics Organisation and their families. We expect the MoD to
continue to consult with the Trades Unions during this period
of change and to provide appropriate support to those affected.
(Paragraph 34)
9. We
would expect the merger of the Defence Procurement Agency and
the Defence Logistics Organisation to deliver substantial efficiency
gains. We look to the MoD to identify what efficiency gains are
likely to be delivered, and to monitor whether these gains are
achieved. (Paragraph 35)
10. The
new Defence Equipment & Support organisation will be huge,
in terms of both manpower and expenditure. Its roles of procuring
equipment and managing equipment through-life are key to ensuring
the effectiveness of our Armed Forces. We are concerned that,
as the organisation will not have agency status, its activities
may lose transparency. We recommend that the new organisation
publish an annual report so as to allow proper public accountability,
and parliamentary scrutiny in particular. (Paragraph 38)
11. We
were impressed during our visit to Barrow in September 2006 with
the commitment of BAE Systems' management and workforce to deliver
the first Astute class submarine before the revised MoD date of
2009. (Paragraph
46)
12. We
are surprised to learn that the prices for boats 2 and 3 have
still to be agreed and, as a consequence, the financial liability
to the MoD is unknown. We look to the MoD to ensure that the negotiations
on the prices for these boats are resolved as soon as possible.
Lessons must again be learned from this programme, as letting
contracts without pinning down prices, and negotiating prices
when equipment is at an advanced stage of manufacture, cannot
be considered 'Smart Acquisition'.
(Paragraph 47)
13. The
delay in agreeing prices on Astute boats 2 and 3 is delaying the
placing of a contract for boat 4. This, in turn, has an impact
on the submarine skills base in the UK. We are examining this
issue as part of our inquiry into the Future of the Strategic
Nuclear Deterrent: the manufacturing and skills base and plan
to report at the end of the year.
(Paragraph 48)
14. The
price for the two future aircraft carriers had yet to be agreed.
The MoD has sensibly commissioned an independent financial review
to advise on what the carriers 'should' cost, and it is to be
hoped that this will lead to agreement on a challenging contractual
price which industry will seek to beat. We look to the MoD to
ensure that negotiations on price are moved forward as quickly
as possible so that the main investment decision on the future
carriers can be taken.
(Paragraph 54)
15. Discussions
on the Future Carrier programme will be crucial to the future
of the UK shipbuilding industry. The programme is a key element
of the Maritime Industrial Strategy. We will examine the Maritime
Industrial Strategy as part of our inquiry looking at the progress
of the Defence Industrial Strategy.
(Paragraph 56)
16. We
have no doubt that the Minister for Defence Procurement, the Chief
of Defence Procurement and MoD officials have made considerable
efforts to ensure that the United States are fully aware of the
information required by the UK on the Joint Strike Fighter to
allow the aircraft to be operated independently. However, it is
still uncertain whether the United States is prepared to provide
the required information. If the UK does not obtain the assurances
it needs from the United States, then it should not sign the Memorandum
of Understanding covering production, sustainment and follow-on
development. Such an impasse on a procurement programme of such
strategic importance to the UK would be a serious blow to UK-US
defence equipment co-operation, which has hitherto been of such
positive benefit to both our nations. If the required assurances
are not obtained by the end of the year, we recommend that the
MoD switch the majority of its effort and funding on the programme
into developing a fallback 'Plan B', so that an alternative aircraft
is available in case the UK has to withdraw from the Joint Strike
Fighter programme. We must not get into a situation where there
are no aircraft to operate from the two new aircraft carriers
when they enter service.
(Paragraph 64)
17. We
are concerned to hear that possible changes to the early production
of the Joint Strike Fighter aircraft programme could lead to an
increase in the price for each aircraft. We look to the MoD to
monitor this situation very closely and keep us informed of developments.
(Paragraph 65)
18. There
has been a long list of defence equipment projects that have experienced
severe problems in terms of cost overruns and time slippage, including
Eurofighter Typhoon, Astute submarines and Nimrod MRA4 aircraft.
The procurement of eight Chinook Mk 3 helicopters is a case which
illustrates the impact that poorly managed procurement can have
on operations. Our Armed Forces in Afghanistan and Iraq desperately
need heavy lift helicopters, yet eight such helicopters are sitting
in hangars in the UK and no-one can tell us when they will be
operational. We look to the MoD and Boeing to resolve this problem
as quickly as possible. The reputations of both parties have already
suffered from this sorry episode.
(Paragraph 73)
19. The
Defence Procurement Agency is to be congratulated for its performance,
to date, in procuring Urgent Operational Requirements for UK Forces
deployed on operations. We consider that there are some important
lessons which can be learned from the procurement of Urgent Operational
Requirements and applied to mainstream equipment procurement,
and we expect the MoD to ensure that this is done.
(Paragraph 77)
20. We
think it vital that the actual user of equipment is involved in
defining the requirement for both equipment procured through the
normal procurement process and equipment procured through the
Urgent Operational Requirements process. MoD should have arrangements
in place to ensure that the actual user of equipment is consulted
and involved in defining the requirement for new equipment.
(Paragraph 78)
21. During
our visits to UK Armed Forces in Afghanistan and Iraq before the
Summer recess, we were told that additional equipment was required
urgently, such as more helicopters. We welcome the Prime Minister's
commitment that whatever package of equipment commanders on the
ground want will be provided. There will always be a need for
requests from the front line to be evaluated by the chain of command,
and ultimately approved by Ministers, but this must be done quickly.
We note the high satisfaction with the Urgent Operational Requirements
process, and look to the Ministry of Defence and the Defence Procurement
Agency to rise to the challenge presented by the Prime Minister's
commitment, ensuring that requests from the field are processed
as quickly as possible. We also look to the Treasury to speed
up the approval of the funding for such equipment procurement
and to recognise that the MoD will require additional funding
to support the equipment once in-service. Service commanders
must not be inhibited from asking for equipment required in the
field by fears that this will impact on their future budgets.
(Paragraph 83)
22. It
is disappointing that modifications are required to the General
Service Respirator which will result in a ten month delay in getting
the respirator into service. We look to the MoD to ensure that
the necessary investment is made, and the required re-trialling
undertaken, to ensure that the General Service Respirator is fit
for purpose when it enters service.
(Paragraph 89)
23. Given
that UK Armed Forces personnel, and police and ambulance personnel,
are likely to be working together in the future, we look to the
Home Office and the Department of Health to consider the benefits
of procuring the same General Service Respirator as is being procured
for UK Armed Forces. (Paragraph
90)
24. The
ASUW Littoral Defensive Anti Surface Warfare project will protect
Royal Navy ships from emerging threats posed by fast attack craft.
We are pleased to see that the project is progressing well and
that the MoD is procuring one of the systems off-the-shelf which
has already been proven and is in-service with the United States.
(Paragraph 95)
25. The
Maritime Composite Training System has the potential to provide
flexible and efficient training for Royal Navy personnel. We look
to the MoD to claw back some of the slippage that this project
has experienced and to ensure that the lessons learned from the
use of Earned Value Management techniques on this project are
promulgated to other project teams in the Defence Procurement
Agency. (Paragraph 101)
26. The
Thermal Sighting System being procured by the MoD will allow the
Self Propelled High Velocity Missile system to be operated at
night, through cloud or in poor visibility and address a significant
capability gap. Changes in the threat mean that 51 of the 134
Thermal Sighting Systems being procured are no longer required.
We expect the MoD to identify how these surplus systems might
be best used to ensure value for money for the money spent. We
also look to the MoD to find an alternative use for the surplus
51 vehicles fitted with the Self Propelled High Velocity Missile
system. (Paragraph 106)
27. There
are lessons to be learned from the successful management of smaller-size
equipment projects which can usefully be applied to larger equipment
projects, and we look to the MoD to ensure that such lessons are
promulgated. We are pleased to hear that the MoD is working with
the Australian Defence Materiel Organisation and the National
Audit Office to identify better ways of defining project complexity
and better ways of controlling projects. It is vital that what
is learned is fully embedded in the new Defence Equipment &
Support organisation, which will be formed following the merger
of the Defence Procurement Agency and the Defence Logistics Organisation.
(Paragraph 110)
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