Memorandum from the Ministry of Defence
Q1. The DPA Annual Report reports a 0% in-year
cost growth for 2006-07 (Key Target 3) although the foreword to
the Report notes that Key Target 3 was "consistently classified
as red throughout most of the year". What specific measures
were taken, and on what programmes, to ensure the Target was met?
Risk of cost growth on a number of programmes
was identified during the early part of 2006-07 and was correctly
reflected in the relevant performance reports. Plans were put
in place to address this. Where practicable, and in line with
one of the key principles of Smart Acquisition, we sought to trade
cost, time and performance to keep within the limits of our budget.
We also maintained the principle established as part of the Departmental
review during 2005-06, and supported by the National Audit Office
(NAO), of identifying and re-allocating costs and budgets to those
best placed to manage them. The measures taken included the reallocation
of costs relating to sustainment of industrial infrastructure
for production of submarines from the Astute project line to one
related to the Maritime Industrial Strategy; the removal of similar
costs from the Type 45 programme related to surface ship shipyard
rationalisation; a reduction in the planned number of missiles
for the Type 45 programme; transfer of the platform integration
costs for the Precision Guided Bomb to the Typhoon programme to
achieve more efficient management of weapons integration in line
with other improvements to the capability of the aircraft; the
transfer of spares costs for the Support Vehicle to the support
budget instead of the acquisition budget; and a reduction in the
number of training simulators for the A400 programme as part of
a plan to utilise training assets more efficiently. Moreover,
the planned quantity of Guided Multiple Launch Rocket System rockets
was reduced pending a further assessment of requirements within
the context of the overall procurement of precision munitions.
Delivering these plans resulted in an overall in-year reduction
in cost to completion of the Key Target population of £25
million.
Q2. The Committee of Public Accounts' report
on the Major Projects Report 2006 (Forty-sixth Report of Session
2006-07) states that, during 2005-06, MoD undertook a review of
the 20 post-Main Gate projects and reduced the costs of these
projects by £781million. Did the MoD undertake a similar
review during 2006-07 and, if so, what were the results? If cost
reductions were identified in 2006-07, how were these achieved?
Building on the specific reviews undertaken
in 2005-06, a routine process of senior leader reviews of major
programmes was established to manage the risks to the delivery
of performance, cost and time parameters. To mitigate these risks,
opportunities to trade both within the particular programme or
the wider project population were identified. Overall, in the
Major Projects Report (MPR) 2007, cost reductions of £989
million have been identified. As detailed in the response to question
1 these were achieved by re-evaluating quantities of equipment
required and re-assessing project requirements. In addition, we
continued to apply the principle established in 2005-06 of ensuring
costs and budgets were allocated to those best placed to manage
them. This resulted in a reduction of £609 million. The NAO
acknowledged that this was justified. At no time has this been
claimed as an overall saving to the MoD.
Q3. What progress has been made in relation
to Phases 3 and 4 of the project to merge the DPA and DLO?
DPA and DLO merged on 2 April 2007 to create
an integrated equipment and support organisation, Defence Equipment
& Support (DE&S), concluding Phase 3 of the merger project.
Post-launch, DE&S has remained on the "front foot",
driving its key business priorities hard.
We continue to deliver our core outputs, with
support to current and future operations remaining our highest
priority. This includes all aspects of support, from delivery
of logistics and Urgent Operational Requirements (UORs) to current
operations through to the management of investment projects supporting
future activity.
Establishing DE&S as a "fit for purpose"
organisation at its launch was a major milestone, but we are now
focussing on optimisation (Phase 4) to ensure it is properly sized
and shaped. This work has been combined with the future development
of DE&S to create a single change programme—PACE (Performance,
Agility, Confidence, Efficiency)—and is being taken forward
under a single change framework against a Blueprint for a more
agile organisation, which delivers support to operations more
effectively while reducing the cost of doing business and delivering
outcomes that further build confidence in DE&S. The Blueprint
was issued to Trades Unions for consultation on 18 January and
published internally to DE&S staff. Work is already progressing
on understanding which activities, functions and skills are key
to output delivery, and how the emerging changes from the Defence
Acquisition Change Programme (DACP) can be fully embedded in DE&S
processes and ways of working. Another important part of the PACE
programme will be work examining the potential benefits of "Flexible
Resourcing". This is an approach that is widely used in both
the public and private sector for maximising the utility and utilisation
of people and their skills within project and service delivery
organisations. Three pilots to examine the potential benefits
of Flexible Resourcing approaches to DE&S will commence in
January 2008 and complete in the Spring. If successful, the pilots
will be followed by a wider roll-out of Flexible Resourcing across
DE&S beginning later in 2008.
Q4. How many DE&S staff will be in post
at the end of September 2007 and how many are expected to be in
post as at the end of March 2008. What progress has been made
in collocating DLO staff in the Bristol and Bath area?
There were 26,345 personnel in DE&S as at
1 December 2007. This consisted of 20,064 civilian and 6,281 military
personnel.
In September 2006, prior to the formation of
DE&S, the total figure for DPA and DLO was 28,669. Following
the merger of DPA and DLO on 2 April 2007 and the formation of
DE&S, this figure had reduced to 27,512. As stated above it
is currently 26,345.
The DE&S Manpower Control Total (MCT) for
the financial year ending March 2008 is 27,650.
The collocation of DE&S staff to the Bristol
and Bath area is underway. Phase 1 included the refurbishment
of two buildings purchased next to Abbey Wood main site to become
"Neighbourhood 5". The first team to relocate moved
from Andover on 3 September 2007, beginning a steady programme
of moves from Andover to the "acquisition hub" in Bristol/Bath.
Acquisition staff will be collocated in the Bristol/Bath area
from Andover, Caversfield and Wyton.
Phase 2 of Collocation will, subject to Main
Gate approval later this year, include the further expansion of
Neighbourhood 5, through construction of additional office buildings
as well as the continuation of moves of staff to the South West.
Staff at Sapphire House, Telford will not now
relocate to the South West. On 11 December, Minister(DES) gave
approval for the internal MoD transfer of provisioning and procurement
activities, and the staff who carry out these activities, to ABRO/DARA
during 2008-09.
Q5. What progress has been made by the project
to improve staff skills in DE&S? What progress has been made
to address the skills gaps which have been identified (such as
commercial, financial and project management skills)? What level
of investment has been committed to addressing the skills gaps?
An upskilling programme began at the launch
of DE&S with the aim of developing a stronger professional
skills base in the organisation. The focus on skills development
was reinforced by the setting of a target for all staff to complete
a minimum of six training days in financial year 2007-08. Further
targets may be set for 2008-09. The training can be job-related,
personal development or mandatory training. A further target of
four training days has been set for staff in the key acquisition
disciplines of Commercial, Finance, Programme and Project Management,
Engineering and Logistics. The need to develop skills in these
areas was reinforced by the DE&S skills survey conducted at
the end of 2006.
Whilst the majority of training will be completed
by making better use of existing training opportunities, a dedicated
upskilling project budget has been established to fund additional
specific strategic interventions in the 5 key skill areas. In-year,
£6.6 million has been allocated for this requirement. This
funding complements the additional investment of some £5.5
million that is being made through the DACP upskilling programme
on the development of new training and education for staff across
the acquisition community. This gives a total investment of just
over £12 million in acquisition skills development.
Within the five key skill areas, the programme
aims to:
— Build capability for the future by
increasing the in-take on engineering technician apprenticeships,
graduate engineering and accountancy training schemes.
— Increase the level of professional
qualifications (eg CIMA, ILS PG Cert, APMP/APM (PQ), and CIPS).
— Support continuous professional development
(CPD) through the delivery of CPD events.
Key aspects of the programme include:
Project and Programme Management—Project
management licences, which are linked to Association of Project
Management qualifications, are being rolled out across DE&S.
As at December 2007, 246 Project Management licences had been
issued. The target is 325 by 31 March 2008.
Finance—Over 40% of staff in DE&S
finance professional posts are qualified accountants and it is
expected that the target of 50% will be achieved by the end of
2007-08. To improve the future position, funding has been allocated
to increase the number of graduates joining the Training Accountant
Development Scheme (TADS) each year and to fund existing employees
on the Corporate Accounting Training Scheme (CATS). 18 graduates
joined the TAD Scheme in September 2007, and seven DE&S employees
were selected in July to join CATS. In addition, 29 individuals
have been provided with funding to undertake the Association of
Accounting Technicians (AAT) training.
Commercial—Over 60% of DE&S
commercial professional posts are filled by individuals with the
relevant Chartered Institute of Purchasing and Supply (CIPS) qualification.
This figure is expected to increase to 65% by the end of 2007-08.
An additional target of 80% of Commercial Directors with MCIPS
by March 2008 has also been set. DE&S Director General Commercial
and the Defence Commercial Director have engaged with CIPS to
determine how this can best be achieved.
Logistics—To address skills gaps
within the logistics area, a new five day Supply Chain Management
course for middle and senior logistics managers, which examines
"best practice" in respect of procurement, contracting,
inventory management, logistics and supply chain management within
the Defence supply/support chain, is being delivered. The DACP
upskilling programme has also developed an Integrated Logistics
Support e-learning course that is available to all staff to improve
awareness of the discipline.
Engineering—Systems Engineering,
an essential skill needed by the whole of the acquisition community,
including Project Managers, Commercial Managers, Scrutineers,
Requirements Managers and Technical staff, was recognised as a
weakness within the DE&S skills survey. A series of presentations/courses,
based around the systems engineering functional competency framework,
are being run by the Defence Academy to address this requirement.
In addition, individuals are being encouraged to register with
their professional institutes to become chartered engineers, incorporated
engineers and engineering technicians and to undertake continuous
professional development. Over £200k has been allocated to
individuals to support attainment of professional engineering
qualifications.
Further funding, totalling £40.9 million,
is available in future years to continue the upskilling work.
As a clearer picture of the skills required across DE&S emerges
as a result of the Performance, Agility, Confidence and Efficiency
(PACE) programme and skills gaps are identified, the focus of
the upskilling project will evolve to address these requirements.
As well as investing in the development of functional
skills, in October 2007 DE&S launched a new high potential
leadership development programme (the Aspire programme) specifically
for the Acquisition community, and will put in place a DE&S
leadership development strategy in April 2008.
Finally, a review is underway into the Role
of the Military in Acquisition (ROMIA). This review will include
identification of acquisition posts which need to be filled by
Military personnel to utilise specific military skills including
those obtained through recent operational experience.
Q6. How are DE&S staff held accountable
for their results and what changes have been introduced to ensure
there is a real focus on outcomes in the new organisation?
The Defence Values for Acquisition placed an
emphasis on delivery against a range of Departmental objectives
and priorities. This emphasis is reflected by the DE&S Main
Board, which includes four Non Executive Directors to provide
an external perspective and independent challenge to the Board.
It is the DE&S Main Board that sets the strategic direction
and priorities of DE&S, which then flow down through the organisation
to be reflected within Team plans and, ultimately, alignment with
individual objectives and priorities. As a feature of the organisation's
Governance structure, a People Board, reporting to the Main Board,
sits to provide the strategic direction of HR policies within
DE&S and ensure that alignment of DE&S objectives and
priorities is translated into personnel policies that focus on
outcomes. The DE&S mission recognises that support to operations
is its highest priority.
In aligning individual objectives with the MoD's
Departmental objectives, the current pay system and specifically
annual performance pay awards are targeted, and success measured,
at an individual level in achieving the challenging business objectives
set. Poor performers, or those who do not achieve the objectives
set, do not receive a bonus. This focus permeates the organisation's
performance management regime, which emphasises accountability
for delivering results whether in direct relation to Urgent Operational
Requirements (UORs) in support of operational theatres or in the
myriad of other DE&S outputs.
In addition to aligning performance related
pay with achievement of specific, challenging objectives, DE&S
is piloting a wide range of specific Reward and Recognition strategies
to further enhance and link improvements in business performance
with the effectiveness, and hence efficiency, of Business Units
and Teams, as well as that of the individual. These include a
High Performance Package that seeks to reward team leaders for
achieving exceptional business results with a blend of financial
and non financial incentives together with a "Rate the Leader"
scheme that is being developed to strengthen leadership within
the organisation. Where appropriate, active career management
intervention is undertaken to manage personnel; this includes
developing means of identifying "potential" high performers
and succession planning for key areas, for example in Project
Management and, conversely, taking prompt and positive action
to manage poor performance which ultimately can lead to dismissal.
There is also a programme aimed at improving line managers' skills
in these areas. In parallel, DE&S is sponsoring a MoD wide
Talent Development Scheme (ASPIRE) that seeks to identify and
develop the leaders required in the Defence Acquisition community
of the future. This developing scheme embraces civilian, military
and industry personnel in seeking to provide a partnership approach
within the MoD and maximising the contributions that this blend
of experience and culture can bring to future acquisition.
Q7. What progress has been made to develop
new performance targets for DE&S, in particular, new targets
covering through-life capability management and the speed at which
DE&S responds to the needs of the Armed Forces? Will DE&S's
achievements against new performance targets be validated by the
NAO?
The initial set of targets established for DE&S
in the first year seek to reflect the broader nature of the mission—"To
Equip and Support our Armed Forces for operations now and in the
future". Support to current operations is a key focus with
targets established against delivery of equipment into theatre
and satisfying Urgent Operational Requirements. These exist alongside
measurement of support to the Front Line Commands in their preparations
for Operations and the former DPA measures of delivering new capability
to performance cost and time. We have also established internal
measures related to development of our people, including upskilling
to meet the challenge of a more joined up approach to Through
Life Capability Management. We are building on these as part of
the wider Defence Acquisition Change Programme to ensure they
fully reflect DE&S's significant contribution to Through Life
Capability Management recognising that it encompasses a wide range
of Departmental components across all lines of development and
therefore must be a pan-Departmental solution.
We are involved in a benchmarking programme
with allies to identify our relative performance in the key area
of delivering equipment into theatre in an effort to identify
opportunities to improve our performance in this area.
There are no plans for DE&S new performance
targets to be validated by the NAO. As the key measures will contribute
to wider Departmental performance, they will be reviewed by the
Defence Management Board. This will inform both the Department's
Annual Report and Accounts and the Public Service Agreement results.
The measures in place for the Departmental Public
Service Agreement for procurement agreed in Spending Review 2004,
of which 2007-08 is the last year, are subject to validation by
the NAO. These cover performance, cost and time of Category A—C
projects that have passed their major investment decision but
not yet achieved their In Service Date.
Q8. The MoD Annual Report and Accounts 2006-07
reports that equipment acquisition targets were met, but the DLO
did not meet its target to deliver 98% [94.9% delivered] of logistic
support for funded levels of readiness and funded support to enable
force generation within planned readiness times (page 136). What
lessons have been identified in relation to this area and how
are they been applied in the new organisation?
The former DLO targets were based around ensuring
our forces were ready for operations with the appropriate levels
of contingency in place. Inevitably, supporting two concurrent
medium scale operations (Afghanistan and Iraq), and some 30 smaller
operations around the world had an impact on delivering readiness
levels as priorities changed accordingly.
Over this period, we have continued to provide
new equipment, delivered UORs whilst continuing to develop and
deliver new approaches to supporting existing capability, as well
as meeting the efficiency targets placed upon the Department.
We prioritise our efforts to meet the needs of operations. Effectiveness
in our ability to do this whilst minimising the impact on our
contribution to generating readiness, is a key lesson. Whilst
acknowledging that the target was missed, when viewed in the context
of the overall operational picture, that should be viewed as an
understandable, if regrettable, consequence.
Q9. How will DE&S report on its achievements
against its performance targets and its financial performance?
Will the annual Major Projects Report to Parliament continue and,
if so, what aspects of DE&S activity will it cover?
DE&S achievement of targets and financial
performance will be reported as part of the MoD's Annual Report
and Accounts. These Departmental targets will be supported by
internal measures which will seek to focus activity on delivering
efficient and effective through-life capability management across
the complete life cycle of equipment. The Major Projects Report
(MPR) by MoD to Parliament will continue. Proposals for the evolution
of the MPR to provide Parliament with a broader view of the Department's
acquisition performance, developed in conjunction with the NAO,
have been submitted to the Committee of Public Accounts.
Q10. What efficiency gains are expected to
be delivered from the merger of the DPA and DLO and over what
timescale? Are these efficiency gains in addition to the existing
efficiency targets set for the DPA and DLO?
Although there are no specific additional efficiency
targets resulting from the DLO/DPA merger, the post merger change
programme is designed to deliver the DE&S contribution to
the Central Enabling Services (CES) efficiency targets as well
as meeting its primary aim of greater efficiency through continuously
striving for ever greater effectiveness. The benefits will be
achieved through streamlining the organisation and transforming
how business is conducted.
Under the new Administrative Cost Regime and
as part of the associated CES targets, DE&S budgets already
assume cost savings of 5% per annum over the next three years.
These savings are in addition to the major efficiency initiatives
already delivered by the DLO and DPA.
In the DLO, there was a coordinated programme
that was designed to improve effectiveness and therefore deliver
efficiency. The DLO's Strategic Goal (the merger of the three
single-service logistics organisation to provide a more effective
and coherent logistics service to the front line commands) delivered
efficiencies of £1.2 billion by 1 April 2007. In addition
to this and the CES efficiencies noted above, further reductions
are already included in the DE&S programme; these amount to
£116 million by 1 April 2008 (largely Spending Review 04)
and £165 million by 1 April 2011 (STP 07). Other main achievements
were:
— The Logistics End to End initiative,
taking forward logistics initiatives across defence organisational
boundaries, from "factory to foxhole" (by FY 06/07 achieved
a cumulative £114 million).
— Procurement Reform, managing expenditure
from a supplier perspective and ensuring coherent procurement
strategies (by FY 06/07 achieved a cumulative £144 million).
In the DPA, efficiency was treated differently
and monitored using three key performance indicators designed
to monitor and improve the timeliness of asset deliveries, as
well the cost of procuring and delivering these assets. The Agency
Accounts for last year show the following achievements against
these key performance indicators.
| 2004-05
| 2005-06 |
2006-07 |
| Target | Outturn
| Target | Outturn
| Target | Outturn
|
| Asset turnover (months) | <70
| 59 | <83 | 72
| <52 | 49 |
| Assets delivered per £ of op costs (£)
| >10.72 | 14.36 | >13.20
| 15.23 | >15.44 | 18.11
|
| Assets procured per £ of op costs (£)
| >16.23 | 19.13 | >23.16
| 23.83 | >18.01 | 20.26
|
Q11. What progress has been made in implementing the other
changes (in addition to the DPA and DLO merger, and staff skills
and training) set out in the Enabling Acquisition Change report,
such as the recommendations relating to the "Planning Process"
and "Approvals and Scrutiny"?
The Defence Acquisition Change Programme was established
to deliver the recommendations of the Enabling Acquisition Change
(EAC) report. A great deal of progress has been made within the
Department; delivering significant organisational and process
improvements, as well as a programme to upskill our acquisition
people and develop the behaviours articulated in the Defence Values
for Acquisition. The EAC report contained 44 recommendations,
the vast majority of which have been fully delivered, with the
remainder in the process of being completed and embedded.
A new departmental planning process brings together previously
separate plans for equipment and equipment support. Planning Round
08 is significantly different from previous years. Responsibility
for programming equipment support costs has transferred from the
DLO to the Sponsor and the Front Line TLB, thereby aligning programming
responsibility with those organisations that have the ultimate
responsibility for delivering coherent future equipment capability
(the Sponsor) and for integrating the Defence Lines of Development
to deliver military capability (the User). Equipment support resources
are being programmed in detail over 10 years. The Front Line Commands
programme the costs of support for in-service equipment for Years
1-4, and the Sponsor programmes the costs of support of all new
equipment and for in-service equipment over Years 5-10.
We have introduced Through Life Capability Management, which
considers a much wider range of options for meeting new capability
needs, examining both new and in-service equipment solutions,
exploring opportunities and implications across all Defence Lines
of Development, while considering capability delivery on a much
longer term programme basis. Success in finding the best capability
solution demands a greater unity of purpose and collective responsibility
from all involved, often beyond their specific areas of financial
or programme responsibility. This activity is led by the Sponsor
(the Equipment Capability Customer) through an improved capability
planning process. A new Capability Management Group and Capability
Planning Group regime is in operation, using consistent processes
and structures. Each group brings together key MoD stakeholders.
Through Life Capability Management was established in April 2007
and has been embedded throughout the year.
The People, Skills and Behaviours workstream of the DACP
has been taking forward work to develop the skills of our people
in acquisition (both within and outside DE&S). A range of
training courses has been, and is being, developed to address
skills shortages in the commercial, programme/project management,
integrated logistics support and through life capability management
areas (see Question 5). The Defence Values for Acquisition are
being reflected in the annual objectives of people across the
acquisition community, and work is underway to develop arrangements
to link the payment of annual bonuses to demonstration of these
behaviours (see Question 6). The DACP has established a programme
of audits to monitor the behaviours of key acquisition individuals
and groups and, through the identification of good practice and
highlighting of deficiencies, we will continue to embed the behavioural
changes. It is acknowledged that these behavioural changes will
only deliver the more constructive, less adversarial relationships
with industry if they are matched by similar behavioural changes
within industry. Industry engagement is being led by the Human
Resources Sub-Group of the National Defence Industries Council
(NDIC).
A revised, streamlined scrutiny and approvals process has
been developed and is being applied progressively to projects.
The new process builds on best practice and introduces a new "Central
Scrutiny and Approvals Staff" team, consisting of representatives
from all scrutiny branches. These teams will facilitate a more
co-ordinated approach to scrutiny and, through ongoing engagement
with both Directorate of Equipment Capability (DEC) and IPT staff,
help to ensure that there is clarity on the information required
at each decision point. A small number of pilot projects have
already been identified and are using this revised process.
Having largely delivered the recommendations of the Enabling
Acquisition Change report, the DACP is continuing work to embed
these changes. The DACP is now working together with industry,
primarily, but not exclusively, through the NDIC Sub-Groups, to
develop a defence acquisition system that is more responsive to
the requirements of the front line and provides better value for
money for the taxpayer, while reducing costs for industry. New,
challenging objectives have been agreed to build upon the good
work done to date, focused on delivery of an affordable equipment
and support plan, reducing uncertainty for MoD and industry. This
is a key enabler, alongside process improvement and the development
of alternative approaches to acquisition, to the achievement of
a significant reduction in acquisition cycle times. The objective
is to halve the time it takes from Main Gate to delivery of capability
to the front line. The process improvement necessary to achieve
this would reduce the cost of doing business for both parties.
Q12. How many UORs have been approved in the current financial
year? What is the value of the UORs approved in the current financial
year? Which operations do these UORs relate to?
As the UOR process is used to address the theatre-specific
needs associated with our current deployments in Iraq and Afghanistan,
much information on specific UORs remains operationally sensitive
and we do not comment in detail on individual items of equipment
or in year approvals. However, a very considerable proportion
of the equipment procured using the UOR process is for Force Protection,
including a world-class system of new combat body armour; protection
upgrades to vehicles on operations, and a fleet of new Protected
Patrol Vehicles to supplement the vehicles already in theatre.
Over £1 billion of Force Protection UORs have been approved
for operations in Afghanistan and Iraq since 2003 in response
to the specific conditions and changing threat in theatre. Up
until December 2007, 796 UORs had been approved to a value of
£2.4 billion. A total of 219 UORs were approved in 2006/07
(124 for Afghanistan and 95 for Iraq) at a value of £793
million.
Q13. The Committee would be grateful for a note setting
out how the Government plans to replicate the service provided
by DESO when responsibility for defence trade promotion is moved
to UK Trade and Investment. The note should include details of
the timescale for implementing the changes announced on 25 July
2007.
The Chief of Defence Materiel is not responsible for the
Defence Export Services Organisation (DESO) or for policy on defence
export promotion.
The Secretary of State for Business, Enterprise and Regulatory
Reform in a statement to the House on 11 December (Hansard, Columns
16-17WS) announced the arrangements under which responsibility
for defence trade promotion would transfer from DESO in the Ministry
of Defence to UK Trade and Investment.
Work to achieve the transfer on 1 April is progressing well
in line with the implementation plan.
Q14. The Committee would be grateful for a short progress
report on the following equipment programmes:
— Joint Strike Fighter (JSF).
— Chinook Mk 3 helicopter.
— Future Rapid Effect System (FRES).
— Military Afloat Reach and Sustainability (MARS).
For the above programmes which have passed Main Gate, the
progress report to include:
— The Current Forecast Cost (against Approved Cost
at Main Gate).
— The Current Forecast In-Service Date (against
Approved In-Service Date at Main Gate).
For each of the programmes, the progress report to include:
— A summary of the key events/decisions since the
Committee last examined the programme[9]
and the key events/decisions expected in the near future (next
six months).
For the progress report on the Future Carrier, the report
should set out how the Royal Navy plans to maintain a carrier
strike capability until the new carriers enter service in 2014
and 2016.
For the progress report on the JSF programme, the report
should include the MoD's assessment of how the arrangements (set
out in the MoU covering production, sustainment and follow-on
development and the unpublished supplement) to ensure that the
UK will get all the technology transfer it requires to operate
the JSF independently are working out in practice.
ASTUTE
| Original MG Approval (90%)
| Current Forecast (50%) | Difference
|
| Cost (£m) | 2,578* |
3,798 | +1,220 |
| ISD | June 05 | November 08
| +41 (Months) |
| | |
|
* Approval only given at 50% confidence level
Key Events/Decisions since last Review (October 2006)
— Construction on the Astute class submarine has
now been optimised to a 22 month drumbeat, which is the optimum
approach to sustain the industrial base and enable a smooth progression
to the construction of the successor submarine programme. This
drumbeat is based on a 7 boat Astute programme, subject to affordability.
— In May 2007 a contract was placed to start initial
construction on Boat 4 (AUDACIOUS), which covers initial build
work until March 2008, when it is intended to place a contract
extension to cover construction until March 2009, before subsuming
this into a whole boat contract. This strategy will ensure that
the ongoing design and cost reduction requirements are fully captured
and incentivised.
— Review Notes covering a re-submission of Boats
1-3 (reasons for, and extent of, cost growth), and seeking permission
to commence work on Boat 4 were approved by the Treasury in May
2007.
— ASTUTE was launched from BAES in June 2007 from
Barrow and is due to enter service in 2009.
— The building of the Astute Class is crucial to
sustaining the industrial capability necessary to design and build
the successor deterrent. The revised drumbeat of 22 months provides
optimal integration with the Successor Deterrent Programme. MoD
acknowledged the need to maintain the key supplier base for the
Astute and Successor programmes in the DIS. There are a number
of lessons from the Astute programme which we will apply, particularly
the potential benefits of the Design for Cost Reduction programme
for Boat 4, which covers procurement, production and design initiatives
that are being managed and worked on collaboratively by BAES and
MoD.
— In August 2007, while undergoing testing on Astute
(Boat 1), power was lost to a lubricant oil pump which caused
damage to the Turbo Generator bearings. A full investigation has
been conducted into the incident. MoD agreed that an in-situ repair
would be the best way to repair the damage and final repairs are
expected by Spring 2008, which will not delay the planned undocking
of ASTUTE in readiness for the final phase of trials at Barrow,
prior to departure for Sea Trials. ASTUTE is scheduled to be delivered
by the contract date of November 2008.
Costs will be agreed between MoD and BAES once all repairs
have been completed.
— ASTUTE successfully completed weapon discharge
trials in September 2007 and Trim & Basin dives in November
2007.
Key Events/Decisions expected in the next six months
— ASTUTE has now returned to the Devonshire Dock
Hall for fitting-out work and Core load (fuelling). ASTUTE is
expected to leave Barrow in August 2008.
FUTURE CARRIER
| Original MG Approval
| Current Forecast | Difference
|
| Cost (£m) | 3,900 |
3,900 | — |
| ISD | 2014 & 2016 | 2014 & 2016
| |
Key events/decisions since HCDC Report on CVF in December 2005
— 14 December 2005—As part of the incremental
Main Gate the announcement was made to move into the Demonstration
Phase.
— 6 March 2006—The UK/French co-operation
Memorandum of Undertaking was signed.
— 25 July 2007—The final Main Gate approval
was announced to move into the Manufacture Phase.
— 25 July 2007—BAE Systems & VT Group
entered into a legally binding Framework Agreement to establish
a Joint venture (JV). BAE Systems, VT and the MoD also signed
a Heads of Terms which set out the intended role of this JV in
the CVF programme. At the same time the three parties signed a
non binding Heads of Terms on the planned Terms of Business Agreement
(ToBA) MoD intends to conclude with the JV in relation to the
future surface warship programme.
— CVF Long Lead items were contracted for over the
latter part of 2007. The first contract with Selex Communications
was signed on 1 October 2007 As part of the process towards the
Joint Venture formation, a legally binding Side Letter of assurance
was signed with the two companies on 11 January 08 in support
of the ToBA
Key Events/Decisions expected in the next six months
— Placement of the Manufacture Contract subject
to legal formation of the Joint Venture.
How the carrier strike capability will be maintained until
the new carriers enter service in 2014 and 2016
The current Maritime Strike capability is provided by the
CVS Class carriers with Harrier GR9 and Sea King ASaC embarked.
This capability will be sustained until the Future Carriers enter
service, in 2014 and 2016. On current plans CVF01 will be in service
before the last of the CVS carriers, ILLUSTRIOUS, goes out of
service (2015), with CVF02 coming into service the year after.
This ensures continuity of a maritime strike platform at all times.
Carrier Strike is a future Joint Force capability comprising
Joint Combat Aircraft (JCA), the two new aircraft carriers (CVF)
and a Maritime Airborne Surveillance and Control (MASC) component,
supported by associated enablers. Combined, these components represent
a step change in capability, and providing this capability includes
managing the transition from the CVS to the CVF and Harriers to
JCA.
JOINT STRIKE
FIGHTER
| Original MG Approval (90%)
| Current Forecast (50%) | Difference
|
| Cost (£m) | 2,236
| 1,858 | -378 |
| ISD | ISD will not be set until MG is approved for the delivery of the aircraft to the UK.
| |
Key events/decisions since December 2006
— Signature of the Joint Strike Fighter (JSF) Production,
Sustainment and Follow-On (PSFD) MoU in December 2006.
— First flight of the first development CTOL JSF
achieved in December 2006.
Key Events/Decisions expected
— First flight of the first development STOVL JSF
in May 2008.
Progress on Production, Sustainment and Follow-On (PSFD) Arrangements
The UK continues to work closely with the US to secure the
commitments it requires with regards to operational sovereignty.
Progress is being made in this area by the UK's inclusion in the
JSF Operational Test and Evaluation (OT&E) development planning,
continued presence and increased access of UK SME's within the
JSF programme in the USA and proposals to increase the level of
access to JSF information for UK Industry.
CHINOOK MK3 HELICOPTER
| Original MG Approval
| Current Forecast | Difference
|
| Cost (£m) | 90.1* |
90.1* | Nil |
| ISD | September 2009* | September 2009*
| Nil |
| * Estimates are at 50% confidence
| |
Key events/decisions
— March 2007—announcement of the cancellation
of the Chinook Mk3 Fix-to-Field programme and conversion of the
aircraft to the Support Helicopter role to make the helicopters
available to operations as quickly as possible.
— August 2007—launch of Phase 1 to commence
design work, procure long lead items, conclude aircraft characterisation
flight trials and prepare robust proposal for the full programme.
— December 2007—Main Gate investment decision
for the full programme and signature of the contract with Boeing
(£62 million).
— These helicopters will deliver a significant boost
to the UK's operational heavy lift helicopter fleet. Chinooks
are a key battle-winning capability. The first helicopters are
expected to be operational in 2009. The eight converted Chinook
will join the existing fleet of 40 RAF Chinook helicopters and
will be based at RAF Odiham in Hampshire.
TYPE 45 DESTROYER
| Original MG Approval
| Current Forecast | Difference
|
| Cost (£m) | 5,475 |
6,464 | +989 |
| ISD | November 2007 | November 2010
| +36 months |
Key events/decisions since February 2007
— May 2007—revised commercial arrangements
agreed with BAES/conclusion of contract negotiations. Price of
Type 45 ships 1—6 in place, increased incentive for completion
of programme.
— July 2007—The first Type 45 vessel, Daring,
undertook Initial Sea Trials.
— August 2007—Treasury signed off revised
costs and revised contract for Type 45 ships 1—6 let with
industry. This is a major achievement, providing a firm boundary
around the programme risks of this hugely complex and demanding
programme and which will put in place incentives for industry
to deliver. As such, the revised contract should provide a very
positive foundation on which to deliver the Type 45 programme.
— August 2007—Initial Sea Trials were successfully
completed on Daring. While a number of teething problems were
highlighted, this is to be expected on the first sea trial of
the First in Class of a ship of the complexity of the Type 45.
— November 2007—The third Type 45 in the Class,
Diamond, was launched.
Key Events/Decisions expected in the next six months
— Continue to exploit ways of joint working with
BAES through Strategic Programme Board with aim of identifying
opportunities and ways to resource the programme more efficiently
and effectively.
— Dragon (4th in Class) is due to be launched in
November 2008.
— Daring's second sea trials are currently expected
to take place in April, with the third set in August/September.
First sea trials for Dauntless (2nd in Class) are currently expected
to take place in September.
TYPHOON
| | Original MG Approval
| Current Forecast | Difference
|
| Cost (£m) | 16,671
| Restricted | Restricted |
| ISD | December 1998 | June 2003
| +54 months |
Key events/decisions since February 2007
— A contract was signed in March 2007 to provide
Typhoon aircraft with an advanced Air-to-Surface capability from
2011. This will complement the initial Air-to-Surface capability
that is due to be available from 2008.
— Stand-up of second operational squadron (11 Sqn)
at RAF Coningsby in March 2007.
— Typhoon took on its first operational role by
assuming responsibility for Quick Reaction Alert (South) in July
2007.
— The Government of Saudi Arabia reached agreement
with the UK Government in September 2007 to purchase 72 Eurofighter
Typhoon aircraft.
— The return of the initial Request for Quotation
response from the Eurofighter industry consortia for Tranche 3
in December 2007.
— Air Defence Operational Employment Date in January
2008.
Key Events/Decisions expected in the next six months
— Tranche 2 Type Acceptance in April 2008, prior
to delivery of first Tranche 2 aircraft in late Summer 2008.
— Multi-Role Operational Employment Date in July
2008.
FUTURE RAPID
EFFECT SYSTEM
(FRES)
| Original MG approval
| Current Forecast | Difference
|
| Cost (£m) | N/A | N/A
| N/A |
| ISD | N/A | N/A
| N/A |
Key events/decisions since February 2007
Real progress has been made on FRES. Implementation of the
FRES competitive Acquisition Strategy is being driven hard to
ensure we deliver, as early as possible, a FRES capability that
meets the Army's needs through life. Specific achievements include:
— June 2007—Min(DES) announced the three vehicle
designs selected to take part in the Utility Vehicle (UV) Trials
(the UV Design Competition). They are VBCI (Nexter), Piranha Evolution
(GD (UK)) and Boxer (ARTEC).
— September 2007—Herbert Smith appointed to
provide legal advice to FRES IPT to ensure to the MoD receives
strong legal, intellectual property and alliancing advice. This
appointment reflects the importance of having access to the best
possible legal advice to achieve the FRES DIS objectives in full.
— October 2007—Competition to select the System
of Systems Integrator successfully completed. Min(DES) announced
the selection of the Thales (UK) and Boeing team as the preferred
bidder on 5 October 2007—2 months ahead of schedule.
— November 2007—Industry responses to Pre-qualification
questionnaire for the UV Integrator role received by FRES IPT
and assessment under way.
— November 2007—Min (DES) announced the outcome
of the UV Design trials. UV Trials completed on schedule in September
2007, producing a recommendation based primarily on technical
considerations. Review of commercial implications of the three
competing designs launched.
Forthcoming key events/decisions
— January 2008—Award of contract for the initial
phase of SOSI support to the FRES programme.
— 2008—Announce the one preferred UV Design
to be taken forward to the next stage of the FRES UV programme.
— Selection of 1 or more UV Integrators to proceed
to the next stage.
MILITARY AFLOAT
REACH AND
SUSTAINABILITY (MARS)
| | Original MG approval
| Current Forecast | Difference
|
| Cost (£m) | N/A | N/A
| N/A |
| ISD | N/A | N/A
| N/A |
Key events/decisions since Initial Gate approval (July 2005)
— July 2005—entry into Assessment Phase announced
via Written Ministerial Statement. The Procurement Strategy at
the time was the formation of an Alliance, comprising the MoD,
an Integrator, a Design, Outfit and Build Alliance Partner (DOBAP)
and a Through Life Support Partner (TLSP).
— February 2006—3 companies (Amec, Raytheon
and KBR) selected to compete for the role of Integrator for the
MARS project. This was announced via Written Ministerial Statement.
— May 2007—Min (DES) approved a decision to
rethink the Procurement Strategy to take account of changing market
conditions and the opportunities generated by the delivery of
the DIS.
— June 2007—The MARS IPT wrote to the three
Potential Integrators, formally informing them that the Integrator
competition had been discontinued.
— October 2007—Industry Day held to inform
the supply chain on the Fleet Tanker requirement and provide a
general programme update.
— December 2007—Following Min(DES) approval,
advert placed in the Official Journal of the European Union (OJEU)
seeking expressions of interest from companies who may wish to
compete for the design and build elements of the MARS Fleet Tanker
programme.
Key Events/Decisions expected in the next six months
— 2009—Preferred Bidder selected for MARS
Fleet Tankers and approval sought for Main Gate Business Case.
Q15. The MoD Annual Report and Accounts 2006-07 (page
342) states that Networked Enabled Capability (NEC) "will
enable the MoD to operate more effectively in the future strategic
environment by more efficient sharing and exploitation of information
within the UK Armed Forces and with our coalition partners".
The Committee would be grateful for a note setting out:
— The key programmes (in-Service or currently
being acquired) which will deliver NEC and their expected cost.
— The key challenges to exploiting the benefits
offered by NEC and how these are being addressed.
— MoD's timetable for reaching the different
"NEC Maturity States" [JSP 777 Edn 1 defines three NEC
Maturity States].
— How the MoD is co-ordinating its overall programme
to deliver NEC with its coalition partners."
The requirement for NEC is not a DE&S responsibility;
the lead within the MoD is the Equipment Capability community.
The Department adopts a long-term and holistic approach to NEC.
Equipment programmes are only part of the picture: how we organise
our business is as important to delivering NEC as the underlying
equipment technologies. It would therefore be helpful to consider
the key challenges for NEC before looking at the main programmes.
Key Challenges
The following are considered as the most significant issues
but the list is by no means exhaustive.
Organisational Change. Whilst the technical complexities
of NEC are important, organisational change to realise the benefits
of NEC requires major effort in a number of areas, for example,
comprehensive staff training, reviews of the size and shape of
headquarters and a project to update our Ways of Working are underway.
At the practitioner level, new Tactics, Techniques and Procedures
are being written, and a series of tests, trials and demonstrations
are being run to enable the potential of NEC to be fully exploited.
Information Assurance. This covers a wide spectrum,
from confidence that information can be trusted to protecting
our systems from attack. Work is in hand to create an overall
architecture, with some aspects already developed. There is, for
example, a policy on how Computer Network Defence should be conducted
and an initiative to provide assured reference data.
How to Share Information. The demands of security
or "need to know" can conflict with the "need to
share" approach implicit in NEC. Security remains essential
but a new approach to security architectures and seamless information
sharing are being investigated together with methodologies to
simplify networks and hence reduce interfaces.
Providing the Network. Investment in network capability
has to be balanced against other demands on the Defence budget.
Equally, there is no point in providing information systems infrastructure
and communications bearers if commensurate investment in applications
and other network users cannot be made. Getting this balance right
is addressed in the regular planning rounds the Department undertakes
to review the forward Defence programme to make sure that we continue
to spend money on the right priorities. A particular case is the
issue of linking the business space and battlespace where for
example there is a need to provide a restricted level bearer solution
for logistics command and control reaching into the deployed environment.
We are looking carefully at how to improve the position in order
to avoid legacy system run-on costs, reduced efficiencies and
a fragmented capability.
Urgent Operational Requirements (UORs). Some UORs
that have been delivered to support current operations by their
nature make a significant contribution to NEC in theatre. For
example the Hermes 450 Unmanned Air Vehicle, improvements to Logistics
Information Systems and capabilities for the Operational Intelligence
Support Group highlight the breadth of such UORs. While support
to operations is our priority, there is a potential tension which
needs to be managed between the short term, operation specific
capability being acquired and our longer term, more measured plans.
Key Programmes
By definition, almost all equipment capabilities contribute
to and/or benefit from NEC. However, we currently estimate that
nearly 60% of the current 500 or so projects in the equipment
plan could be described as significant contributors in some way
to NEC. The following list illustrates the range of the more prominent
examples.
Defence Information Infrastructure (DII)— This
network is being rolled out in the fixed sites in UK. An initial
capability has been approved to extend to deployed HQs at a cost
of some £370 million for delivery in 2008-09. An initial
top secret capability is being considered for deployment shortly
afterwards. Decisions have not yet been made on the remaining
requirement for deployed, fixed and top secret capability.
FALCON—This will provide a modern high capacity
communications network principally for deployed land operations.
Increments A and C have been approved at a combined cost of some
£250 million with ISDs in the 2010-11 timescale. Increments
B and D remain under consideration and no decisions have been
made.
Skynet 5—This is a military satellite communication
service provided under PFI arrangements. Costs are around £200
million per annum until around 2020. The first two satellites
of this system have been launched.
Bowman CIP—The Bowman Combat Infrastructure Platform
(CIP) secure tactical radio and information system is already
in service. A capability upgrade, Bowman CIP 5, was trialled late
last year and the results are currently being analysed. Bowman
CIP is a £2.4 billion programme and brings major capability
improvements to situational awareness, communications and operational
tempo.
Multi-National Information Sharing (MNIS)— This
is an incremental programme to deliver effective operational interoperability
between nations with a priority for command and control applications,
initially with the US.
Tactical Data Links—Multiple programmes using
technology such as Link 16 that contribute to overall capability
for tactical command and control.
DABINETT—This programme is currently in the concept
phase and intends to deliver a system of systems to address our
future Intelligence, Surveillance, Target Acquisition and Reconnaissance
(ISTAR) requirements. DABINETT aims to address two distinct but
related capability gaps—the ability to undertake deep and
persistent surveillance of the battlefield and the ability to
manage the intelligence cycle efficiently from end to end. Given
its wide scope, DABINETT plans to adopt a programme approach with
individual projects or groups of projects managed within an overall
programme framework. Delivery is likely to be incremental and
include a combination of existing and future platforms and sensors,
support centres and links to intelligence systems.
NEC Maturity States
The Department set out a broad framework for taking NEC forward
in Joint Services Publication (JSP) 777 over two years ago. This
is an area of particularly fast moving ideas and technology and
as the JSP 777 foreword says, "We live in a world where change
is . . . fundamental". The passage of time has confirmed
that the logic that underpins NEC remains sound but has also highlighted
the need to update the initial timelines used in Part II. This
work is in hand with the aim of bringing a greater degree of objectivity
to the process of describing the maturity states and setting milestones.
The initial state definition will accordingly be adjusted to reflect
progress made to date. On this basis, we currently expect the
first initial state milestone to be set at 2012, the second milestone
for the beginning of the transitional state milestone at 2017
with the mature state yet to be fully defined. A 3-Star Senior
Responsible Owner has been appointed in recognition of the significance
of NEC as a Defence priority.
Co-ordination with Coalition Partners
The Department expends significant effort engaging with its
coalition partners to ensure that as much coherence as possible
is obtained with key allies. While this is a complex area and
staying exactly in step with other nations is neither achievable
nor desirable, key dependencies have been identified. In order
to address core interoperability concerns that sit at the heart
of NEC, we engage actively in the following fora:
The Interoperability Commission (IOC). The IOC
is the key UK-US senior official level bilateral forum that addresses
operational and technical interoperability. Fourteen UK-US "tiger
teams" meet regularly to progress interoperability across
the whole C4ISTAR domain.
Bilateral Meetings. These include for example meetings
with Australia to progress pan-environment military harmonisation.
Combined Communications Electronics Board. This
addresses communications policy, interoperability and publications
amongst the 5-Eyes member countries to "enable interoperable
C4 capabilities that make warfighters more effective in Coalition
Operations". Working Groups cover all communications and
information systems aspects and outputs are harmonized with those
of NATO wherever possible.
National Armaments Directors (NADs). The NADs of
France, Germany, Italy, the UK and the United States supervise
a number of working groups which address NEC issues such as coalition
combat identification, research and technology projects and future
UAV operational concepts.
NATO. NATO has a full sub-committee structure under
the NATO C3 Board that covers all aspects of C4ISTAR.
23 October 2007
9
The Astute submarine, Future Carrier, JSF and Chinook Mk 3 helicopter
programmes were examined in the Committee's Defence Procurement
2006 report (First Report of Session 2006-07) published on
8 December 2006. The Astute submarine, Future Carrier, JSF, Type
45 Destroyer and Typhoon programmes were examined in the Committee's
The Defence Industrial Strategy: update report (Sixth Report
of Session 2006-07) published on 15 February 2007. The FRES programme
was examined in the Committee's The Army's requirement for
armoured vehicles: the FRES programme report (Seventh Report
of Session 2006-07) published on 21 February 2007. Back
|
