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Last April the Defence Procurement Agency and the Defence Logistics Organisation merged to form Defence Equipment and Support (DE&S). The aim of the merger was to create an integrated equipment and support organisation. At the time of the merger, DE&S had some 29,000 staff and a budget of £16 billion—43% of the defence budget.
The merger was a major undertaking made more challenging by the need to support operations in Iraq and Afghanistan and was achieved to the planned timetable. DE&S staff must be commended for the speed at which they have delivered urgently needed equipment into these two operational theatres.
While we agree that the merger should improve the through life management planning of equipment, it is too early to judge whether it and other elements of the Defence Acquisition Change Programme are delivering the expected benefits. The planned streamlining of DE&S, which will see the number of staff reduced by 27% by 2012, will need to be carefully managed to ensure that the best staff are retained and the services provided to our Armed Forces are not adversely affected.
It is vital that DE&S has a highly skilled workforce. We find it inexplicable that the number of DE&S staff is to be substantially reduced when staff are currently so busy that they have insufficient time to attend the training and upskilling courses they need.
The Defence Procurement Agency met all its Key Targets in 2005-06 and 2006-07. DE&S took over these targets for 2007-08, but does not expect to meet the Key Target relating to programme slippage. Seven of the largest equipment programmes which featured in the Major Projects Report 2007 have experienced in-service date slippage in 2007-08 totalling some 6.5 years. Once again, the MoD has failed to control slippage on key equipment programmes. We are concerned that the MoD only now acknowledges that it needs to include in the project management skills of its staff the ability to examine critically a contractor's programme schedule and consider whether it is credible.
We find it a matter of concern that the MoD considers that it has no control over time slippage on international equipment programmes. The MoD needs to identify why this is the case and what steps it can take to improve its control.
As at the end of March 2007, the Astute submarine, Type 45 destroyer and Nimrod MRA4 aircraft programmes were together forecast to cost some £2.9 billion more than the Approved Cost. The combined in-service date slippage for these three programmes was 166 months—almost 14 years.
The Nimrod MRA4 programme has experienced further cost growth of some £100 million in 2007-08, bringing the total forecast cost growth on this programme to £787 million or 28% of the Approved Cost. The programme has also experienced further slippage in 2007-08 which now totals 92 months, some 7.5 years. The new Minister for Defence Equipment and Support needs to look closely at this programme to assess whether it is ever likely to deliver the capability that our Armed Forces require within the timescale needed. If it does not, the MoD should withdraw from this programme.
Last July, the Secretary of State for Defence announced that the MoD would be placing orders for two aircraft carriers to enter service in 2014 and 2016. The manufacture contract has still not been signed and the MoD could not tell us why. Further delays to signing the contract run the risk of slippage to the forecast in-service dates and cost increases.
We were disappointed to learn that Joint Strike Fighter (JSF) aircraft will not be available to operate from the first new aircraft carrier when it is due in service in 2014. The MoD plans to keep the Harrier GR9 aircraft in service until around 2018 and to operate these aircraft from the new carriers. The MoD originally planned to buy up to 150 JSF aircraft. We would expect the number of JSF aircraft to be determined by what the UK needs for its defence capability.
The Planning Round 2008, which the MoD is currently working on, is considered more challenging than the Planning Round 2007. All equipment programmes are being examined. Cuts or delays are expected to some of the major equipment programmes.
The MoD needs to take the difficult decisions which will lead to a realistic and affordable Equipment Programme. This may well mean cutting whole equipment programmes, rather than just delaying orders or making cuts to the number of platforms ordered across a range of equipment programmes. A realistic Equipment Programme will give confidence to our Armed Forces that the equipment programmes that remain will be delivered in the numbers and to the timescale required, and will also allow industry to make informed investment decisions.
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