Select Committee on Defence Minutes of Evidence


Examination of Witnesses (Questions 40-59)

GENERAL SIR KEVIN O'DONOGHUE KCB CBE, DAVID GOULD CB AND LIEUTENANT GENERAL DICK APPLEGATE OBE

29 JANUARY 2008

  Q40  Richard Younger-Ross: You seem very pleased with its progress. Is there anything that delays it or holds up any part of it?

  General Sir Kevin O'Donoghue: One of the strands was to produce an affordable and balanced budget and that will be a challenge, as I think the permanent under-secretary said.

  Q41  Richard Younger-Ross: One of the targets for performance management is the creation of a set of metrics. Have those been set?

  General Sir Kevin O'Donoghue: We are setting them.

  Q42  Richard Younger-Ross: By when do you expect that to be done?

  General Sir Kevin O'Donoghue: We need something in place by the start of next year. The challenge was to move from input to output metrics. How do we measure through life capability? How do we persuade this Committee and others that we are delivering through life capability in the way we say we are? It is those sorts of metrics that we are now putting in place. We shall trial them between now and 1 April and see whether we can develop something that is meaningful in the way of a through life capability measure.

  Q43  Richard Younger-Ross: Not only are you being asked for through life capability but the change programme is meant to deliver capability more quickly?

  General Sir Kevin O'Donoghue: Yes. The challenge placed on me by Lord Drayson—it was placed on the department because there are more players than just DE&S—was to reduce acquisition time, particularly the demonstration and manufacture bit of it, by 50%. The CADMID cycle is that the concept phase is the concept phase. As to the assessment phase, I have always resisted an arbitrary cut in time because I think that for some very complex and highly technical projects you need a longer assessment phase; you need to de-risk before you move to demonstration and manufacture. But we are looking at ways to reduce the demonstration and manufacturing phase by 50%. Part of it is much quicker decision-making within MoD.

  Q44  Richard Younger-Ross: You used the words "looking at". Are there any examples you can give to assure us that this is happening?

  General Sir Kevin O'Donoghue: FRES is quite a good example of reduced timescales.

  Mr Gould: To give a specific example emerging from FRES, what we have done with the demonstration trials—the so-called trials of truth—is that rather than seek to develop an entirely new vehicle from scratch we are taking existing designs and finding out how much further development needs to be done, so the amount of work that needs to be done at the D&M phase is the minimum necessary to get to the initial upgrading capability, not the complete redevelopment of an entirely new design. That is one way of cutting into the time taken up.

  Q45  Robert Key: Before we get any deeper into detail I want to ask you about the philosophy of where you think you are going. What do you believe the Ministry of Defence wants? Does it want fewer people in your organisation or to spend less money on that organisation?

  General Sir Kevin O'Donoghue: It is very clear that the government-wide target is a reduction in the cost of overheads and that is the administrative cost regime laid upon all departments.

  Q46  Robert Key: If any organisation is told to reduce the cost of people it can do it in two ways: it can lose a large number of people who are not paid very much or a small number of people at the top who are paid more. Which are you doing?

  General Sir Kevin O'Donoghue: It will be both. This is not a downward pressure on numbers. How many people do you need to deliver your outputs?

  Q47  Robert Key: Are you relying upon being able to buy in consultants for the expensive jobs and losing more of the people who would be there if you did not have to engage those consultants?

  General Sir Kevin O'Donoghue: A lot of the jobs will go because as we move to contracting for availability a lot of the transactional work that we currently do in-house will move to industry. As we form these partnering arrangements quite a lot of the work done will move across to industry which is better placed to do it. I think we shall finish up with a higher skilled and paid workforce but a smaller one.

  Q48  Mr Hancock: One of the criticisms we have often had from industry is that the customer can choose the changes and expectation of the particular equipment it has sought to obtain. What will you do to overcome the issue of the goal posts being continually moved by the customer who demands changes and costs go up mainly, as manufacturers tell us, because the process is not clear from day one?

  General Sir Kevin O'Donoghue: Perhaps I may separate that into two. You are absolutely right that there is requirement creep, as it is called, and customers, in this instance front line commands, will often change their minds. That is something about which we need to be fairly rigorous, unless it arises because the threat or security aspect has changed. A very good example perhaps is electronic counter-measures where the threat continually changes and the reaction by industry working through the project teams has been outstanding. ECM equipment is continually being altered to meet changing threats. We need to become much more agile.

  Q49  Mr Hancock: But in some instances it has prevented much needed equipment coming into service, has it not?

  General Sir Kevin O'Donoghue: You may be right, but there is always a balance. Do you want something that is 80% right now—this is my view—with an open architecture that you can build on incrementally as changes occur?

  Q50  Mr Hancock: I would settle for that, but we have not done it in the past?

  General Sir Kevin O'Donoghue: We have not always done so, but the line we are driving forward now is to have an open architecture with incremental upgrading and innovation to be added as required either by the threat or as research and technology develop something much better.

  Lieutenant General Applegate: In addition to guaranteeing operational focus within the organisation I work in the other direction to make sure that they are part of the team and understand the consequences of some of the decisions and the requirements they set. We want to make sure they are involved in the trading process and understand the cost of some of the things they would like to have. I am there to make sure they are realistic and pragmatic. In a way, it is a matter of weighing up the various competing demands of those in the front line, particularly those on operations, those in the equipment customer community in London who set the requirement and those in DE&S. One of the roles of the Chief of Materiel is to span all of those to try to make sure that we do not have an "us and them" approach. We shall come back to FRES later, but part of the role we have been playing is to make sure there is absolute realism, that hard decisions are faced and that adequate briefing is given so there is a greater understanding of the technological background and proper cost implications, not keeping them at arm's length and saying, "Well, that is our specialist business. You just tell us what you want." Fundamentally, that is one of the roles that we as Chief of Materiel have in dealing with each of the front line services.

  Mr Gould: A fundamental of good project management is good change of control. What you need to do is use the assessment phase to do the trading process to which General Applegate referred and ensure there is a common understanding between ourselves, suppliers and customers about the level of capability following the assessment phase investigations which will be pursued in the initial development and production standard. I think you will find that our clients in the Armed Forces, the users, are prepared to do that kind of bargaining provided they can see in a long-term project that there is a growth path to insert capability changes as you go through life in the future. The key to the whole thing is good change control. The kind of thing to which Mr Hancock refers happens when you do not exercise good change control inside the project and that is where both we and industry suffer the uncontrolled change to which reference has been made. It is a fundamental of good project discipline that that is carried out, working with the customer and supplier to make sure it is done properly.

  Q51  Chairman: There was a time when smart acquisition was the Holy Grail. Do you say that defence acquisition change has taken its place?

  Mr Gould: I do not believe in holy grails for project management; other people may do so. If I were to write a book on the subject it would be called No Golden Bullets or something like that.

  Q52  Mr Hancock: Is it a change for you, Mr Gould?

  Mr Gould: No, it is not, but I have learnt a lot over the years, believe me. It comes down to the discipline of good project management. The change programme can provide you with the right atmosphere, surroundings and conditions, but fundamentally it is good project and good programme management that gets you the right result. There is no magic formula. There are some really good disciplines. I have here a 10-point card which I am very happy to share with the Committee.

  Q53  Chairman: What is the top point on that 10-point card?

  Mr Gould: The top point is that we lay down the foundations of success early. Hindsight is a wonderful thing, but for most projects that get into difficulties you can look back and say that that was all foreseeable if only more attention had been paid to it right at the start and people had not given in to the temptation to compromise, ignore a difficulty and pretend something could be done quickly when it could not be. I think the most difficult thing is to retain that sense of objectivity and realism in the programme but at the same time not lose the ambition.

  Q54  Richard Younger-Ross: My background is architecture which is a form of project management. The one bit I learnt as the defining point is that if you did not get the brief right everything else would fall apart. A very good example is defence procurement where the brief keeps changing.

  Mr Gould: Fundamentally, one talks about good change control, but that starts with having a really good common understanding on both sides as to the project outcome that is expected, the brief if you like.

  Q55  Chairman: May we please have copies of your card?

  Mr Gould: You may indeed.[2]

  Q56  Chairman: Who else has it?

  Mr Gould: It is available on the acquisition operating framework, so anybody who has access to the defence intranet can obtain it.

  Q57  Mr Jenkin: Did you give it to the new minister?

  Mr Gould: I am not sure that I have yet, but I will make sure that is done.

  Q58  Chairman: I am sure she will look forward to it.

  Mr Gould: I have certainly discussed it with her, but I shall make sure she has one.

  Q59  Mr Jenkins: I had the opportunity to see Lord Drayson a couple of weeks ago. He took time off from racing his biofuel cars round circuits in America and so on. He said that one of the big differences between what he is doing now and the defence side is that if in the afternoon a Formula 1 car suffered a broken strut when going round a track it would be photographed, downloaded to the manufacturer, the alterations would be discussed, the part would be made, flown out to the circuit, fitted on the car and the car would be on the track next morning. He does not expect the defence industry to achieve that pace in the near future but there is a marked difference in terms of how long it takes for it to get to that dealer and produce an enhanced strut, or even get round to seeing the one that is broken. As to Through Life Capability Management, would you like to explain to the Committee what benefits you expect from this approach?

  General Sir Kevin O'Donoghue: Perhaps I may first comment on your initial statement. The way we achieve what Lord Drayson describes is through contracting for availability. When the cost of not repairing something falls on the contractor he repairs it very fast. A good example may be Rolls-Royce at Filton near Bristol. They have a military engine operations room across the end of which is a big sign for the Rolls-Royce workforce to see—we contract for availability of engines—which says "Remember! Spares are now a cost, not a profit". Harrier is another very good example. Under the old way of doing business if something was wrong with a Harrier photographs were taken, reports were written and it was sent back to BAE Systems and perhaps some time later a view would be taken. Now there is a BAE Systems engineer on site and he has to be available within two hours. He may still say that it is not airworthy, but at least a decision is made very quickly. That is because we are pushing back onto the manufacture the risk of unreliable equipment. Risks arise in a number of ways. Financial risk seems to migrate back to the biggest player, which is ourselves; operational risk will always stay with us, but I do believe that the risk of unreliable equipment is one we must push back onto the manufacturer.




2   See Ev 40. Back


 
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