Conclusions and recommendations
1. We note that the new Framework Document
provides a clearer statement of the top-level objectives for Dstl
and makes it a key objective to maintain and sustain its capability
to support the MoD in the future. We see such an objective as
vital and look to the MoD to provide the necessary resources to
achieve it. (Paragraph
20)
2. Dstl has been proactive in networking with
other organisations involved in defence research in the UK and
overseas. International collaboration in defence research offers
substantial benefits to the UK. For Dstl to be able to continue
to collaborate with the US and other nations, it is vital that
the UK provides sufficient research funding for Dstl to retain
its current position and continue to be regarded as a worthwhile
collaborative partner. (Paragraph 24)
3. Dstl
achieved seven of its ten Key Targets in 2005-06. Action is in
hand to address those targets which were not fully achieved in
the year. (Paragraph 28)
4. We look
to the MoD to review the Key Targets set for Dstl to ensure they
are challenging and reflect their central function: providing
expert advice to Government. (Paragraph
31)
5. Since
it was formed Dstl has demonstrated a strong financial track record
increasing its profits and its net assets. However, Dstl's income
is very dependent upon the amount of work which the MoD considers
must be done within Government, which is some 37 per cent of the
MoD's defence research budget. Dstl is not expecting any increase
on this percentage and does not see it as its role to compete
for other research work funded by the MoD. We consider that there
could be benefit in Dstl operating in a more competitive environment
and look to the MoD to assess whether there is scope to open up
to competition some of the defence research budget currently allocated
to Dstl and scope to allow Dstl to compete for defence research
work currently carried out by others.
(Paragraph 39)
6. Dstl
is a Trading Fund, but only undertakes work that has to be done
within Government and does not compete for work. There are advantages
to Dstl remaining a Trading Fund, notably its ability to retain
profits for future investment in the business. However, given
the constraints under which Dstl operates, we look to the MoD
to review, on a regular basis, whether Trading Fund status is
the most appropriate option. (Paragraph
42)
7. Dstl's
Chief Executive resigned at the start of May 2006 and, as at the
start of February 2007, a permanent appointment to the post has
not been announced. Dstl is embarking on a major change programme
which the Chief Executive will be responsible for overseeing.
We look to the MoD to appoint a permanent Chief Executive as soon
as possible. (Paragraph 46)
8. For Dstl
to retain its position as a leading defence research organisation,
it needs to recruit high quality graduates and retain and develop
its current scientists and engineers. We are pleased to learn
that Dstl has a number of initiatives to achieve this and that
the MoD's Chief Scientific Adviser sees the recruitment and development
of the next generation of scientists as one of his main tasks.
While Dstl and the Chief Scientific Adviser were not unduly worried
about recent closures of university physics departments, we are
concerned that something which at the moment does not seem to
be causing a problem for Dstl may well in the future begin to
do so. We shall keep an eye on this important matter.
(Paragraph 54)
9. Dstl
has embarked on a major change programme, intended to transform
it into an integrated laboratory or ""i lab"".
The programme includes a substantial site rationalisation: the
building and refurbishment work associated with this has a target
price of £92 million. We look to Dstl to draw on outside
project management expertise to monitor closely progress against
cost and time targets relating to this work so that action can
be taken if cost increases or delays look likely.
(Paragraph 65)
10. It will
be important for Dstl to monitor whether the expected benefits
from the ""i lab"" change programme are delivered.
We expect Dstl to put in place arrangements to track both the
qualitative and quantitative improvements that flow from the change
programme. (Paragraph 66)
11. One
of Dstl's top-level objectives is to generate a financial return
for the taxpayer by exploiting its Intellectual Property. Ploughshare
Innovations Ltd, a wholly owned Government Company, has been created
to act as Dstl's technology management company. We note that the
aim of such an arrangement is to prevent Dstl from being distracted
from undertaking its core work and to draw in staff with expertise
in exploiting intellectual property. (Paragraph
78)
12. In the
first two years of its operation, 2005-06 to 2006-07, Ploughshare
is expected to raise some £500,000 and further income growth
is expected in the future. This is to be welcomed, but we are
unclear why Ploughshare will retain this income if the aim is
to generate a return for the taxpayer. In addition to financial
objectives, Ploughshare has been set non-financial objectives.
We look to the MoD and Dstl to track performance against these
non-financial objectives as well as its financial performance,
and to provide full details in Dstl's Annual Report and Accounts.
(Paragraph 79)
13. For
companies such as Ploughshare, which are either wholly or partly
owned by Government Departments, it is important that arrangements
are in place to minimise risk and potential conflicts of interest.
The MoD has recognised these risks and put in place governance
arrangements to address them. We look to the MoD to keep these
arrangements under review to ensure they remain appropriate.
(Paragraph 80)
14. The
MoD has told us that the Defence Diversification Agency (DDA)
has a different role from Dstl, but we are unclear about what
exactly it does or why—if the MoD thinks there is no clear
requirement for the service the DDA offers—it still exists.
We look to the MoD to make a swift decision on the future of the
DDA. (Paragraph 85)
15. The
Defence Technology Strategy launched in October 2006 will have
a significant impact on Dstl's future work, as Dstl will need
to ensure that its areas of expertise, programmes and capabilities
are aligned with the requirements of the MoD set out in the Strategy.
We look to the MoD and Dstl to push forward their discussions
about this, so that there is a clear understanding of the areas
on which Dstl needs to focus in the future.
(Paragraph 91)
16. We call
on the MoD to clarify what progress has been made in securing
a greater contribution to Research and Development by industry
through the road map laid down in the Defence Technology Strategy.
(Paragraph 96)
17. We recognise
that supporting operations in Iraq and Afghanistan is an immediate
priority for the MoD and that it is inevitable that some research
funding will be directed to short-term research to support these
operations. In its response to our report, we expect the MoD to
assure us that the cost of the operations in Iraq and Afghanistan
has not resulted in cuts to the defence research budget and to
clarify whether, and in what respect, longer-term defence research
has been cut in order to provide research support to these operations.
The MoD must not make reductions in the funding of longer-term
defence research to fund the costs of these operations, as such
reductions will result in reduced UK military capability in the
future. (Paragraph 100)
18. The
MoD's Chief Scientific Adviser considers that the UK is second
equal with France in terms of its global standing in defence research
and, in some research fields, Dstl is the world-leader. However,
we are concerned that the gap between the UK and the US in defence
research will continue to widen. This could leave the UK trailing
further and further behind the US and losing its current position
to other nations which are increasing their investment in defence
research. We look to the Chief Scientific Adviser and to the MoD
Ministers to make a strong case for an increase in the investment
in defence research in the current Spending Review. The MoD and
the Treasury must not ignore the impact on the UK's future defence
capability if such an investment is not made. A failure to invest
will also have implications for the MoD's ability to retain the
high quality scientists it needs in defence research.
(Paragraph 107)
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