PRECISION GUIDED BOMB
The Paveway IV (PWIV) is the MOD's Precision Guided
Bomb. Its ISD slipped beyond its declared 90 per cent date as
the result of technical issues, namely a fuze reliability problem
encountered during Operational Evaluation (OPEVAL) Trials. The
MOD, in conjunction with the prime contractor, Raytheon Systems
Limited, is giving Thales Missile Electronics (TME), the fuze
sub-contractor, every opportunity to deliver a reliable fuze at
the earliest opportunity. In order to mitigate the risk of a further
and protracted slip to ISD, however, parallel activity has been
undertaken with an alternative fuze supplier.
A revised programme has been developed which will
result in PWIV Full System Acceptance by March 2009 (50 per cent)
and recent success during trials at Pendine has increased confidence
that the fuze will perform to specification when tested during
the re-scheduled PWIV Operational Evaluation trials in June 2008.
The operational consequences of the slippage have been mitigated
by the introduction of the Enhanced Paveway 2 Plus UOR for Op
HERRICK.
12. (Recommendation 12) We are concerned to hear
that the MOD has little control over time slippage on international
equipment programmes, given that many of the MOD's equipment programmes
including Typhoon and the Joint Strike Fighter are international
programmes. We call on the MOD to set out in its response to this
report what conclusions it draws from this problem about the nature
of international programmes, what steps it has taken in the past
to limit these disadvantages and the extent to which these steps
have been successful. (Paragraph 65)
The development and subsequent manufacture and delivery
of defence equipment is technically challenging and often involves
leading edge technologies. Undertaking programmes with international
partners involves many of the same risks associated with programmes
pursued independently. A key issue is to ensure the risks are
well understood and sufficient provision is made for them at the
outset to secure a good foundation. It also requires an appreciation
by all the participating nations of the broader risks associated
with collaborating, for example, differing budgetary and approval
regimes or technical clearance requirements, and allowing for
these.
Collaboration is a very powerful vehicle for sharing
non-recurring costs, risk, technologies and knowledge as well
as leveraging the benefits of economies of scale associated with
larger numbers. It also allows nations to pursue a capability
that would be beyond its means to pursue independently.
The UK has collaborated with other nations for many
years on defence programmes and we have sought to learn and apply
the lessons from these as new opportunities have emerged. For
example, recognising our experience in previous collaborative
programmes where there have been cost overruns and delays in bringing
equipment to the front line, we continue to work with OCCAR (Organisation
conjointe de coopération en matière d'armement)
to bring greater rigour to the management of certain programmes.
A key lesson we have sought to apply is to lay down the foundations
for success early by being clear about the requirement of each
nation and seeking to identify and effectively manage the key
risks to delivery.
A robust Memorandum of Understanding and associated
governance structure is also a key enabler to both protect national
interests as well as support effective delivery of the requirements
of the participating nations. The Joint Combat Aircraft programme
is a good example of where we and our partners have clearly understood
and bounded risks associated with the development of the capability
being sought.
13. (Recommendation 13) We note that in 2006-07
the MOD reduced the forecast costs of major equipment programmes
by reducing quantities of equipments, reassessing requirements
and by re-allocating expenditure to other equipment programmes
or budget lines. In its Major Projects Report 2007 the NAO expressed
concerns about this approach and did not expect to see "this
level of re-allocation in existing projects in future reports".
We share the NAO's concern. In reporting its performance against
the Key Target relating to cost growth in 2007-08, we do not expect
to see the MOD shifting expenditure between different budget lines
to give the impression of good cost control on equipment programmes.
We plan to follow this up to check that the MOD has not done so.
(Paragraph 68)
We note the Committee's intention to follow up this
point in the future.
14. (Recommendation 14) We note that, as with
the MOD Head Office, DE&S is to be streamlined with the loss
of some 7,500 staff—27% of its workforce—by 2012.
As with the streamlining of the MOD Head Office, we remain to
be convinced that improved economy, agility and responsiveness
will follow from the reduction in staff. We look to the MOD to
provide adequate support for those DE&S staff who are to lose
their jobs. The MOD must monitor closely staff morale during the
streamlining of DE&S and ensure that it continues to deliver
the services which our Armed Forces require. (Paragraph 77)
Implementation of the DE&S Leadership strategy
and activities to improve line management capability will be including
a particular focus on managing and maintaining morale and managing
performance through this period of change. We are also working
with the Cabinet Office to pilot an employee engagement survey,
and will be utilising the results from this survey to focus activities
in areas which will engage those we need to maintain and improve
performance within DE&S. We are also monitoring a range of
other people related metrics to ensure that we retain individuals
with the right skills, and that we are providing the working environment
which engenders their commitment.
Through the implementation of the DE&S Change
Programme—PACE—which is aligned to MOD's Streamlining
initiative, we will transform DE&S business over the next
four years. Characteristics of this change include a strategic
intent to move all office based staff to the Bristol area and
the need for fewer staff through the development of a more highly
skilled workforce. Throughout this period, support will be offered
to those staff leaving the Department, and DE&S will maintain
its mission to support to the Armed Forces with the aim of ever
improving the effectiveness of the support we provide.
The Departmental Early Release Scheme is one of the
main mechanisms available to the MOD, including DE&S, to reduce
staff numbers. It provides opportunities for early departure to
those affected by DE&S changes and streamlining. In determining
how it will operate, we have ensured that the criteria for selection
only provide early release for those individuals whose skills
are not needed in the future. Those who take early release under
this scheme will be offered a full support package to assist their
transition out of the Department.
15. (Recommendation 15) Military equipment acquired
by DE&S must be reliable and available for use by our Armed
Forces. We note that the MOD is seeking to push back onto the
manufacturer the risk of unreliable equipment by contracting for
availability. We consider this to be a promising approach and
we look to the MOD to evaluate whether these new arrangements
deliver the expected benefits in terms of improved availability
and, if so, to consider how they might be used more widely. (Paragraph
82)
We are examining the current composition of MOD's
support portfolio across the Department and considering both future
and current contracts. We propose to address a range of options
for individual programmes and capability sectors in the light
of our experience in negotiating and delivering against availability
contracts and of other innovative commercial approaches.
16. (Recommendation 16) In its response to our
report, we expect the MOD to set out the reasons why the current
Planning Round is so challenging given the real terms increases
to defence expenditure set out in the Comprehensive Spending Review
2007. (Paragraph 89)
All planning rounds are challenging given the opportunities
for spending money on desirable defence outputs inevitably exceed
the budget available. Hard judgments about priorities, therefore,
need to be made. The rolling programme of equipment modernisation
and improvement, which is the subject of the Committee's report,
constantly needs to be sequenced and prioritised to ensure an
affordable programme. We also need to absorb cost growth in individual
equipment projects and, beyond the equipment programme, to manage
new cost pressures, for example from fuel and utilities (though
the net additional costs of fuel for operations are covered by
the Treasury Reserve).
17. (Recommendation 17) We note that the MOD is
preparing advice to Ministers about the defence budget for the
three years 2008-09 to 2010-11 and that the MOD acknowledges that
there are likely to be cuts or delays to projects in the Equipment
Programme. 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. While it is the
natural inclination of all governments and departments to avoid
bad news by "moving programmes to the right" rather
than by cutting out an entire capability which has many supporters,
such an approach can cause in the long run more financial and
operational damage than confronting the perennial problem of an
over-ambitious Equipment Programme. 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. This is an issue we plan to return to. (Paragraph 94)
MOD will shortly be embarking on planning round 09
which will help in ensuring that the equipment plan is realistic,
affordable and matched with our priorities for the coming years.
In advance of this, we are undertaking an examination of our planning
assumptions for equipment over the next ten years. The examination
will focus on two issues above all: bearing down on cost increases
to equipment programmes; and rebalancing the equipment programme
to better support the frontline. The outcomes of the examination
will feed into the planning round.
18. (Recommendation 18) We note that the merger
of the DPA and DLO will contribute to generating annual net cash-releasing
savings of some £250 million by 2010-11 and that there will
be further savings in the future as most of DE&S business
is collocated in the Bath and Bristol area. (Paragraph 98)
We confirm the Committee's understanding, and note
the Committee's comment about the delivery of future savings.
19. We are concerned to learn that the new performance
targets for DE&S will not be validated by the NAO, as was
the case for the Key Targets of the DPA, now merged with the DLO
to form DE&S. Independent validation of reported performance
against Key Targets provides Parliament with assurance that the
reported performance is accurate. In its response to our report,
we expect the MOD to set out the reasons why it has no plans for
the targets to be validated by the NAO and how independent validation
will be achieved. (Paragraph 102)
There is no mandate for Top Level Budget Holders
within the MOD, such as DE&S, to have their performance validated
by the National Audit Office (NAO) (the exceptions are Public
Service Agreement and Defence Resource Account results) or any
other independent organisation. DE&S performance is reported
to the Defence Board and informs results published against the
Department's Public Service Agreement/Departmental Strategic Objective.
In addition, those projects that appear in the Major Projects
Report will continue to be subject to NAO validation.
20. (Recommendation 20) We note that the MOD is
benchmarking its performance against its allies in delivering
equipment into theatre. We consider this to be a useful exercise
and, given our on-going interest in current operations, look to
the MOD to inform us of the results and the lessons identified.
(Paragraph 103)
We continue to examine the opportunities for benchmarking
our acquisition and logistic support activities against those
of allies and industry, although finding comparable data is not
straightforward. Work is at a preliminary stage and no conclusions
have yet emerged. We will keep the Committee informed of progress
on this activity.
21. (Recommendation 21) We note that the Major
Projects Report is to be revised to provide a broader view of
equipment acquisition. However, we remain concerned that the revised
Major Projects Report may not provide visibility of the performance
of programmes against their acquisition targets covering time,
cost and performance, and that poor performance against these
targets might be difficult to identify within the broader view
provided. In its response to our report, we expect the MOD to
provide us with a summary of the key changes expected to the Major
Projects Report, the categories of equipment programmes that will
be covered, and when the revised format is likely to be approved.
We also expect the MOD to continue to provide the key information
in respect of the performance of individual programmes. (Paragraph
106)
The revision of the Major Projects Report, which
is being undertaken in close consultation with the NAO and with
the agreement of the Public Accounts Committee, will build on
the existing report's time, cost and performance focus, both deepening
and broadening the coverage, giving the opportunity for closer
scrutiny. There will be no dilution in the information available
for Parliamentary scrutiny.
The major short-term changes are likely to: increase
the focus on maturity, in risk and technology terms of those programmes
which are pre the major investment decision point; widen the post
major investment decision point programmes exposure to include
all the Lines of Development such as training, manning and infrastructure;
include in the population major upgrades; and move away from the
rather narrow focus on in-service date, to the wider Initial Operating
Capability measure, with aspirations to indicate progress towards
Full Operational Capability. In the longer term we have a desire
to include a small number of in-service capability reviews aimed
at underlining how previously acquired capabilities are being
used and are performing. It is expected that this approach will
give a more rounded feel to the report, covering the whole acquisition
cycle, including through life upgrades and will, therefore, give
a more useful view of the Department's activity.
We are currently trialling the scope of the new report
with an expectation that, with the agreement of the Public Accounts
Committee, the report produced in 2009 will start to reflect the
changes. With the pressures on staff, we will need to make sure,
through the trials, that the additional overhead associated with
gathering the information is not excessive and that it has utility
for broader management use.
22. (Recommendation 22) We note that the MOD has
identified key lessons from the problems experienced to date on
the Astute submarine programme. We consider it vital that these
lessons are taken into account when the MOD acquires the successor
to the current Vanguard class submarines and look to the MOD,
in its response to our report, to set out how it plans to ensure
this is done. (Paragraph 120)
Both the MOD and the UK submarine industry are starting
from a very different point with Successor than with Astute. When
work to acquire Astute first started, neither MOD or industry
had recent experience of the complex and challenging work of designing
and building submarines. Both now have much better understandings
and experience of the cost drivers and strategic risks that face
the submarine enterprise.
Plans are in place to ensure that relevant Astute
experience and lessons learnt have been and are being shared;
this will continue to be the case going forward. These include:
the use of experience to inform the creation of the Successor
risk registers and mitigation actions; the use of Astute lessons
learnt to inform the development of both procurement and commercial
strategy; ensuring that there are former team members from the
Astute programme, from both MOD and industry, working within the
Successor team; and the use of independent peer reviews that should
address if lessons learnt, not just from Astute but across the
wider Acquisition community, are being applied.
Both the Astute and Successor project teams are part
of DE&S' Submarine Cluster, so are part of a common senior
management group and benefit from close working relationships
with each other at all levels.
23. (Recommendation 23) The Type 45 destroyer
programme experienced a further forecast cost increase of £354
million and a further 11 month time slippage during 2006-07. We
note that the MOD did not change the specification for the Type
45 Destroyer, so this was not the reason for the further forecast
cost growth and time slippage. In its response to our report,
we expect the MOD to set out the key lessons identified from this
programme and to provide us with an update on how the programme
is currently performing against its Approved Cost and In-Service
Date. (Paragraph 123)
In the Major Projects Report 2007, T45 reported an
in-year cost growth of £354 million and 11 months in-year
slippage to the ISD. The increased costs were attributable to
an increase in the costs of ship build, mitigated partly by savings
including a change in overheads resulting from the Maritime Industrial
Strategy. The ISD slipped as a result of a realistic reassessment
of remaining schedule risk. A number of lessons have been learnt
from our experiences to date on the T45 programme. The project
has essentially suffered from a combination of two factors. First,
the project contained a high degree of technical risk (for example,
new gas turbine engines, radars and weapon system). While this
will give the T45 military superiority it is clear, in hindsight,
that some of the systems were not at a sufficient level of maturity
at the time the design and manufacture (D&M) contract was
placed. The second factor was the nature of the D&M contract
itself which was placed relatively early in the project cycle
and was based on delivery of performance, not on a technical specification;
this left industry holding a significant amount of risk that was
not adequately bounded. Furthermore, MOD held the integration
risk between the ship build and the main engines and weapon systems.
Taken together, these factors left significant risk, without sufficient
contingency, lying with the MOD.
The lessons from T45 have not only been fundamental
to the contracting strategy for projects such as CVF, but have
also been fed back into a major renegotiation of the T45 contract
in 2007/08. The new contract recognised where the remainder of
the risks in the project actually lay, and moved responsibility
for these risks, including the contingency funding associated
with them, to the party best placed to manage the risk. We have
also adopted an innovative approach to customer handover and trials
that allow all parties to assess any issues that arise during
trials and determine the level of risk contingency that is desirable
for mitigation, and what can be tolerated. In this way MOD has
very considerable control over these decisions and a greater visibility
and ability to minimise any time/cost growth in the project. The
trials of First in Class, Daring, have exceeded expectations in
terms of the performance of the ship. This year is key for the
weapon systems trials and we are cautiously optimistic that the
major expenditure on de-risking throughout the project will now
pay dividends.
24. (Recommendation 24) Since the DE&S Chief
Operating Officer, Mr Gould, told us that the problems being experienced
on the Nimrod MRA4 programme were not considered unusual, that
they had been experienced on the MRA2 programme and that "it
was predictable", we are deeply concerned that they nevertheless
seem to have come as such a surprise to the MOD. His comment that,
until the prototype had been built, "that is the first time
you can test it against reality" may be true, but for the
MOD to have failed to have provided for the risk turning into
reality cannot in the circumstance be excused by the suggestion
that "it would have been a low probability". We accept
his contention that, because of the long gap between the MRA2
conversion programme and the MRA4 programme, some 20 years, the
experience from the earlier programme had been lost, but we are
disappointed that this had not been recognised at a much earlier
stage of the programme. (Paragraph 126)
The stability problem experienced by the MRA4 is
not a legacy issue from the MR2. It is primarily caused by the
revised wing and tailplane configuration of the MRA4.
The problem did not come as a surprise. It was recognised
from the start of the programme that the MRA4 would, like the
MR2, exhibit a tendency to instability in pitch in some areas
of the flight envelope. It was also predicted that this instability
was likely to be more pronounced than that of the MR2.
From the outset, the design of the MRA4 included
a device called the "Speed Trim System" (STS) to counter
the predicted level of instability. Extensive wind tunnel testing
was undertaken on the design, however, primarily as a result of
the complexity of the inner wing design, the correlation between
the wind tunnel and aircraft handling characteristics was less
close than envisaged. Flight testing has shown that the instability
is more severe than anticipated and that the STS alone is insufficient,
hence the need to develop a more sophisticated Stability Augmentation
System.
The loss of experience between the end of the MR2
programme and the commencement of the MRA4 programme is not relevant.
The increased instability of the MRA4 is a consequence of its
re-designed wings and tailplane. The requirement for a Stability
Augmentation System could not have been identified by further
analysis of the MR2 design.
25. (Recommendation 25) At the end of 2006-07,
the Nimrod MRA4 programme had experienced a forecast cost increase
of some £687 million, almost 25% greater than the approved
cost, and has experienced further cost growth in 2007-08 of some
£100 million. Given the huge cost growth seen on this programme,
we are concerned that the MOD does not appear very alarmed by
the additional cost growth in 2007-08, referring to it as "just
a little less than three per cent of the total programme cost".
The programme has also experienced further slippage in 2007-08
which now totals 92 months, some 7.5 years. (Paragraph 129)
Time and cost variations for the Nimrod MRA4 programme
are discussed at paragraph 11 of this document (in response to
paragraph 64 of the Committee's report).
26. (Recommendation 26) In our report on the Ministry
of Defence Annual Report and Accounts 2006-07 we recommended that
the MOD undertake a review of the Nimrod MRA4 programme in order
to ensure that best value for money is achieved in maintaining
this important capability, both in quality and quantity of platforms.
This is a programme that has been beset by one problem after another
and neither the MOD nor the contractor appears to be able to get
a grip on it. We hope that the new Minister for Defence Equipment
and Support will look closely at this programme and consider whether
it is ever likely to deliver the capability our Armed Forces require
in the timescale needed. If it is not the MOD should withdraw
from the programme. (Paragraph 130)
The Nimrod programme is kept under continual review,
as are all projects, to ensure that we obtain the best value for
money. The MOD expects the aircraft to enter service in 2010.
There has been a review of capability and Nimrod MRA4 remains
the most cost-effective means of meeting the requirement in the
stated timescale.
27. (Recommendation 27) It is disappointing that
the in-service date on the A400M transport aircraft programme
has slipped a further nine months in 2007-08 and it is now expected
to enter service some two years later than the original approved
in-service date. As we recommended in our report on the Ministry
of Defence Annual Report and Accounts 2006-07, we look to the
MOD to work closely with the contractor for this programme to
reduce the risk of any further delays and, where possible, to
identify ways to recover some of the forecast slippage. (Paragraph
135)
We currently assess that Airbus military has a very
limited opportunity to recover the delays to A400M aircraft development
that have been experienced to date. Given that the UK is not,
however, the first nation scheduled to take aircraft delivery,
and that delivery of our 25 aircraft (as specified in the contract)
spans from 2010 to 2015, we are working with the company to examine
potential opportunities to recover delay through increased production
delivery rates.
28. (Recommendation 28) We recommend that in its
response to our report, the MOD sets out the key findings of the
review of the A400M programme undertaken by the DE&S project
rehabilitation unit. (Paragraph 136)
The DE&S Chief Operating Officer commissioned
a review of the programme last year, which was carried out by
the MOD's Project Rehabilitation Unit. It provided an independent
assessment of the programme's schedule status, which confirmed
the position reported to MOD by industry at that time, together
with recommended actions that DE&S could take to improve the
management of the programme. These actions related to Certification
and Qualification (CQ) planning for System Acceptance (including
UK-specific Test and Evaluation), and the Assessment Phase for
In Service Support.
In the case of CQ, DE&S has had some success
in increasing multinational attention on associated planning and
driving forward the need to increase the efficiency of the interface
between the multinational CQ Committee and industry. Current work
is now focussed on the production of a comprehensive schedule
for all CQ activities. For System Acceptance, DE&S has completed
a review of its requirements and how these will be demonstrated.
We have identified the resources required for UK-specific aspects
and have started to identify the most appropriate arrangements
for addressing these. While there is more to be done, the associated
risk has been successfully reduced to a level that is typical
for the current stage of the programme.
In regard to In Service Support, DE&S has completed
a review of the activities required in support of the Assessment
phase it is running and has produced an updated programme plan.
The IPT structure has also been adjusted to better align resources
with key tasks. While further work is ongoing to test the plan
with associated stakeholders (in order to ensure that all requirements
for service delivery, including expenditure approval and contract
award, have been successfully captured and that resources are
available to meet a demanding schedule of activity), the plan
is now being implemented.
29. (Recommendation 29) We note that the Army,
as the front line user, has been closely involved in the process
of identifying the preferred FRES Utility Vehicle design and that
the design which has been recommended is the Army's preferred
option. (Paragraph 142)
We confirm the Committee's understanding.
30. (Recommendation 30) We note that the FRES
Utility Vehicle design which has been recommended is a "developmental
vehicle" and that the MOD considers that this is the best
option as it can be upgraded and its capability increased over
time. We also note that the MOD considers that acquiring an "off-the-shelf"
vehicle would not provide scope for increasing capability and
would have a very limited life. While we recognise that these
are strong arguments for acquiring a developmental vehicle for
the FRES Utility Vehicle, such an option is also likely to involve
higher costs and increased risks to the in-service date because
of unforeseen problems during the further development. If the
recommended design is approved, the MOD needs to ensure that it
identifies the key risks on the programme and how these are to
be managed. (Paragraph 144)
The Committee has correctly noted that the Department
decided to base the FRES Utility Vehicle family on a vehicle design
currently in development. The Committee also noted that one of
the key factors in this decision was that there was no 'off the
shelf' vehicle design currently available (defined as an armoured
vehicle currently in service that would not need further modification)
with the growth potential to increase its capability over time.
The other key factor is that there is no 'off the shelf' vehicle
available that is capable of meeting the UK protection requirement.
Accordingly, we selected three development vehicle
designs (BOXER (Artec), PIRANHA (General Dynamics (UK) Ltd and
Vehicule Blinde Combat d'Infantrie (Nexter)) to participate in
the Utility Vehicle Trials in 2007. It was subsequently announced,
on 8 May 2008, that we have provisionally selected the Piranha
5 as the preferred design to be taken forward to the next stage
of the Utility Vehicle programme. Piranha 5's confirmation
as the preferred design will be subject to the completion of a
package of work on risk reduction to ensure it provides the MOD
with the best possible capability at the right price and at the
earliest opportunity.
31. (Recommendation 31) We find it an issue of
concern that the MOD appears to be at an advanced stage with regard
to selecting the FRES Utility Vehicle design yet has still to
clarify what the planned In-Service Date is. In its response to
our report, we expect the MOD to provide clarification on this
matter. (Paragraph 146)
Our policy not to formally release the ISD for new
equipment programmes until all the relevant factors have been
taken into account and the main investment decision has been taken
was outlined by the previous Minister for Defence Equipment and
Support, Lord Drayson, to the Committee on 19 December 2006.
As Lord Drayson explained, right up to the point
when we take the main investment decision, there is a debate both
internally and with industry aimed at defining the optimum balance
between performance, time and cost. Only when we have concluded
this debate are we in a position to define the level of performance
we want to achieve, what it will cost and when it will enter service—premature
release of cost, timescale or performance forecasts can lead to
pressure to conclude projects within unrealistic constraints.
We are, however, implementing a strategy that is
designed to achieve the earliest ISD of a vehicle which meets
the Army's needs and offers the potential for sustained operational
effectiveness through life.
32. (Recommendation 32) In its response to our
report we expect the MOD to set out how many Mastiff vehicles
are being procured for operations in Iraq and Afghanistan, how
the acquisition of armoured vehicles for these two operations
impacts on the FRES requirement, and how the MOD plans to use
these vehicles when they return from current operations. (Paragraph
147)
Following the announcement by the Defence Secretary
on 24 July 2006, 108 Mastiff vehicles were ordered from Force
Protection Industries Inc. of Ladson, South Carolina. Deliveries
of the first tranche (Mastiff 1) are: 49 delivered to Op TELIC;
36 delivered to Op HERRICK; 18 delivered to UK Training; one reference
vehicle remains in UK; and four have been re-roled to Ambulance
variant (of which three have been delivered to Iraq and one has
yet to be deployed). For the second tranche (Mastiff 2), a total
of 174 further Mastiffs are now on order from the same company.
Upon receipt, we are planning that the base vehicles will undergo
UK integration by a UK provider to fit them with Bowman radios,
electronic countermeasures, an infra red 360 degree camera system,
a protected weapon platform/turret and significant additional
armour. Some of these vehicles are to be configured as Ambulance
variants or Command vehicles.
There is no impact on the FRES programme resulting
from the procurement of Mastiff. The Department has previously
outlined a coherent two track approach to meeting its Armoured
Fighting Vehicles (AFV) needs. The strategy makes a clear distinction
between the urgent, short term need for Protected Patrol Vehicles,
such as Mastiff, designed for Peace Support Operations, and those
AFVs needed to provide an effective FRES capability across the
full spectrum of future operations. The introduction of Mastiff,
along with a range of additional measures including upgrades to
protection equipment, vehicle upgrades and introducing other new
equipment such as Vector is designed to address the risks faced
by our service personnel in the short term. These measures, however,
are not, and never were, intended to meet the Army's longer term
requirement for new medium weight armoured fighting vehicles.
That requirement will be met by FRES. While these separate needs
are part of a single, coherent strategy, they are distinct requirements,
managed entirely separately within the Department.
The Mastiff vehicle has been procured to support
current operations and its future role will be confirmed when
the commitment has finished.
33. (Recommendation 33) When we held our oral
evidence session on 29 January 2008, the Manufacture contract
for the Future Carriers had yet to be signed. We find it a cause
of concern that the MOD did not seem to know what was holding
up the signing of the Manufacture contract. It appears that the
formation of the Joint Venture between BAE Systems and VT was
a factor behind the delay, but the MOD's view on why this had
not happened did not appear to match that of industry. (Paragraph
159)
We announced in Parliament on 20 May 2008 that we
have written to industry to confirm our intention to sign the
Manufacture Contract once the proposed BAES/VT Joint Venture Company
BVT Surface Fleet has formed. We have completed the necessary
alignment of planned annual expenditure, work schedule and commercial
arrangements in relation to the CVF's and are pressing ahead with
work to support the start of manufacture.
34. (Recommendation 34) We note that the MOD expects
the Manufacture contract for the Future Carriers to be signed
by the end of March 2008. We found unsatisfactory the responses
from the MOD on the reasons for delay in signing the contract.
We think it likely that much of the cause relates to the current
difficulties in the Planning Round, but there must come a point
where delays in letting the contract will affect the programme
schedule and the expected in-service dates of 2014 and 2016. Further
delays are also likely to lead to increased costs on the programme.
We plan to monitor this closely. (Paragraph 162)
The Future Carrier programme remains on schedule
and there has been no change to the ISDs of 2014 and 2016, which
were announced at the time of the Main Gate Announcement in July
2007. We are now ready to place the Manufacture Contract and in
the intervening period have continued to make progress towards
manufacture. For example, we have placed a number of sub-contracts
with the supply chain for design and engineering data and for
materials, equipments and infrastructure in support of manufacture.
35. (Recommendation 35) We also call on the MOD
to set out what roles the two Future Carriers will perform when
they come into service and what capabilities these expensive ships
will give us that could not be provided in other ways. Since the
1998 Strategic Defence Review there have been reductions in the
number of current and planned surface ships, such as the Type
45 destroyer. We therefore look to the MOD to confirm that the
two new carriers will have sufficient protection to undertake
the roles expected of them while not removing from other tasks
the naval cover that the country will continue to need. (Paragraph
163)
The two Aircraft Carriers (CVF) are at the heart
of, and key enablers for, the UK's expeditionary capability articulated
in current Defence policy. They offer both a coercive presence
worldwide contributing to conflict prevention as well as providing
a flexible and rapidly deployable base during operations to deliver
increased strategic effect and influence around the world at a
time and place of our choosing. CVF, together with embarked aircraft,
will assure the provision of combat airpower from
an independent sovereign base that is not reliant on another nation's
support when access, basing
and overflight cannot be guaranteed, or when the UK may wish to
act alone through military or political advantage. This analysis
was endorsed by the New Chapter work of 2002 and reinforced in
the 2003 Defence White Paper.
The protection of high value units such as CVF in
a multi-threat environment involves the coordination of layers
of air, surface and sub-surface defence from within the carrier
task group. The Type 45 destroyer will provide a key part of this
force structure, working in concert with other ships, submarines
and aircraft and utilising network enabled capability as a force
multiplier for the weapons and sensors available to the task group.
36. (Recommendation 36) We note that the MOD expects
the Future Carrier programme to be delivered below the approved
cost of £3.9 billion as a result of the incentive arrangements
that it plans to put in place. While it is important to acquire
the two carriers within the Approved Cost, the MOD must also take
account of the through-life costs of the carriers which will be
many times greater than the acquisition costs. The MOD needs to
make the necessary investment when acquiring the carriers so that
substantial savings through-life will be delivered. In its response
to our report, we expect the MOD to set out the forecast through-life
costs of the two carriers and how its investment to date in the
programme is expected to reduce the through-life costs. (Paragraph
166)
Through life costs of the two Future Carriers were
considered as part of the CVF Main Gate investment decision and,
on an annual basis, were estimated to be broadly comparable with
those of the three CVS carriers currently in-service. A more precise
and mature forecast of through life costs is being developed and
refined as part of the Assessment Phase of the Carrier In-Service
Support Solution and will not be set until this support project
achieves Main Gate approval.
The CVF Project's strategy for reduction of through
life cost is made up of three strands. First, a 'Design for Support'
approach to building supportability and human factors into the
design which has been incentivised, in part, by making the Aircraft
Carrier Alliance (ACA) the preferred bidder for the support solution. For
example, the adoption of integrated electric propulsion reduces
the number of high maintenance prime movers and transmission systems
whilst improving fuel efficiency. As another example, our investment
in the development of a Highly Mechanised Handling System will
significantly reduce the number of operators required and thereby,
through-life manning costs. Second, we are ensuring, through careful
specification and investment in the design and procurement processes,
that the ships will be delivered with the right 'support products'
to enable the ship's company to correctly operate and maintain
the ships. Third, we are investing in the development of a value
for money and affordable In-Service Support Solution. Starting
with a thorough understanding of in-service support costs and
with the nomination of the ACA as the preferred bidder, the intention
is to have a solution in place to meet the ships' in-service dates.
Once the ships have generated a support history, it should then
be possible to further develop the solution to share with industry
the risk and reward, on availability and thereby increase incentives
for performance and cost savings.
37. (Recommendation 37) We note that the MOD is
content with how the restructuring of the UK surface ship sector
is progressing. This is an issue which we plan to monitor closely.
(Paragraph 167)
We note the Committee's intention to monitor this
issue closely.
38. We note that a contract to upgrade Rosyth
dockyard, where the final assembly of the two aircraft carriers
will take place, has been signed. (Paragraph 168)
We note the Committee's statement.
39. (Recommendation 39) We acknowledge that cost
has to be a factor in determining the procurement of major equipment,
but we would expect the number of JSF aircraft to be primarily
determined by what the UK needs for its defence capability. In
its response to our report, we look to the MOD to set out the
different roles which JSF aircraft will be required to undertake
and how many aircraft will be required to fulfil each of these
roles. (Paragraph 174)
40. (Recommendation 40) We note that the MOD considers
that one of the benefits of the JSF programme is that it does
not have to decide on the number of JSF aircraft it will acquire
"at the start". While we acknowledge that UK participation
in the programme provides this flexibility, we are surprised that
the MOD does not consider it an issue that it does not know how
many JSF aircraft it requires because it is "at an early
stage in the programme". We take issue with the term "early
stage", as the MOD has already spent in the order of £1
billion on the JSF programme and the first aircraft carrier, which
the JSF aircraft will operate from, is expected to enter service
in 2014—just six years away. (Paragraph 175)
Joint Strike Fighter (JSF) is a fifth generation
supersonic, low observable aircraft. It can undertake air to ground
missions in heavily defended airspace with secondary roles of
close air support and air defence. Alongside the new aircraft
carriers, it will form the cornerstone of the UK's future carrier
strike capability.
JSF numbers are driven by a range of factors including
training needs and pilot numbers, the anticipated airframe life,
attrition considerations and the number of JSF we might anticipate
deploying in a range of operational scenarios.
41. (Recommendation 41) The acquisition of two
new aircraft carriers and Joint Strike Fighter (JSF) aircraft
to operate from them will provide the core elements of the MOD's
'Carrier Strike' capability. We are disappointed and concerned
to learn that JSF aircraft will not be available to operate from
the first new aircraft carrier which, on current plans, is expected
to enter service in 2014. We recommend that, in its response to
our report, the MOD sets out the reasons why JSF aircraft will
not be available to operate from the first new aircraft carrier
when it enters service and the latest estimate of when sufficient
JSF aircraft will be available to operate from both carriers.
(Paragraph 178)
We are still finalising our transition plans from
the Harrier to JSF and have not yet set the JSF In-Service Date.
We will, however, initially fly GR9 from CVF and are planning
for the incremental acquisition of JSF. We continue to ensure
the coherency of both programmes and throughout the transition
we will seek to retain the ability to deliver capability for operations
from land or sea using CVS, Harrier, CVF and JCA.
MOD has never planned to operate both carriers with
a full complement of JSF simultaneously. There may be occasions
where both carriers are deployed on operations at the same time,
but this will involve a mixture of air assets including the JSF.
42. (Recommendation 42) We note that Harrier GR9
aircraft are to be operated from the first new aircraft carrier
and that these aircraft will remain in-service until around 2018.
We look to the MOD to undertake an assessment of how the 'Carrier
Strike' capability would be maintained if JSF aircraft were not
available to operate from the two aircraft carriers in 2018 when
the Harrier GR9 goes out of service. (Paragraph 179)
Although we have not yet set an ISD for JSF, based
on our current assessment the incremental introduction of JSF
would be underway well before GR9 is preparing to go out of service.
We expect the initial operating capability of JSF to be established
in time to ensure a seamless transition for the two aircraft types
to maintain our carrier strike capability. We will not speculate
about missing an ISD which has yet to be set.
43. (Recommendation 43) We consider that there
is a strong case for having a general procurement contingency
held centrally by the Equipment Capability customer rather than
at the individual equipment project level. We look to the MOD,
in its response to our report, to set out what consideration it
has given to a general procurement contingency and whether and
how it plans to introduce such a system. (Paragraph 182)
The 2006 Enabling Acquisition Change report recommended
that a positive contingency should be introduced within the defence
programme. We have introduced positive contingencies against a
number of specific projects, but introducing a more general contingency
has been constrained by competing pressures in the equipment programme.
It remains our intention to introduce such a contingency as soon
as practicable. We are also seeking increasingly to manage
projects by portfolio, where there is more scope to balance pressures
across a range of capabilities.
We are looking at how a more general contingency
could be introduced into our programme. It is likely that
it would be introduced incrementally into the later years of the
programme.
44. (Recommendation 44) Substantial in-service
date slippage on major equipment programmes has often been a result
of over-optimistic estimates by contractors of the likely programme
schedule. It is, therefore, worrying to learn that the MOD only
now acknowledges that it needs to include in the project management
skills of its staff the ability to examine a contractor's programme
schedule and consider whether it is credible. In its response
to our report, we look to the MOD to set out how it plans to up-skill
its staff working in defence acquisition, so that they are able
to examine critically the estimates provided by contractors both
in relation to a programme's schedule and cost. (Paragraph 185)
As part of a wider skills development programme,
DE&S project management staff are encouraged to complete a
range of training courses as part of a corporate commitment to
complete six days training and four days continuous professional
development each year. The training builds towards achieving Project
Management (PM) licences, which start at Level 1 for posts that
require at least an Awareness level PM functional competence,
rising to Level 2 for posts that require Practitioner level competence:
experience is also a major factor in their award. These licences
are underpinned by the Association for Project Management qualifications
and test competence against the PM Body of Knowledge which includes
an understanding of the tools and methods used by contractors
to estimate a programme's schedule and cost. More broadly across
the Department's acquisition community, a major investment was
made during 2007/08, via the Defence Academy, to deliver new classroom
training and e-learning that focuses on project management and
commercial skills, including risk management, scheduling, estimating
and assessment of contractor's proposals.
45. (Recommendation 45) We note that the MOD is
introducing techniques, such as Earned Value Management, to improve
its visibility of the progress on equipment programmes and to
identify potential problems as early as possible. We look to the
MOD to assess whether the expected benefits are delivered by such
techniques and, where they have been, to ensure that they are
adopted on other programmes. We also expect the MOD to learn from
the experience of the US Department of Defense in using Earned
Value Management, such as on the Joint Strike Fighter programme.
(Paragraph 188)
We have recognised the considerable benefit of implementing
Earned Value Management (EVM) as part of a rigorous Project Performance
Management regime, learning lessons from experience in the US.
There has been a growth in the number of equipment based projects
adopting such an approach, most notably Astute and T45 in the
maritime sector, and a wide variety of projects in other sectors,
for example Falcon. Effective implementation has led to a far
more constructive relationship with key suppliers, undertaking
joint planning, using a common set of project performance data,
and joint analysis of metrics. DE&S continues to promote EVM
as a key component of further improving Project Management, with
an increased focused on implementing effective Integrated Project
Controls and Performance Management.
The use of EVM for JSF has been a key management
process since the start of the programme in 2001 to monitor the
cost, time and performance metrics of the contract. The EVM System
data attained during the System Development and Demonstration
phase is one of the key indicators used to monitor programme health
on a monthly basis and has provided the JSF Programme Office sufficient
insight to the Estimate at Completion which initiates re-plan
activities to ensure programme success, and provides the necessary
data to determine system maturity prior to major programme milestones
(Interim Design Review, Critical Design Review). EVM data has
been the basis for key programme decisions, most notably the decision
in 2004 to add 18 months and $8Bn to the programme time and cost
to resolve aircraft weight and performance issues.
46. (Recommendation 46) We note that the MOD is
paying more attention to the date at which equipment can deliver
initial and full operating capability, rather than just the in-service
date. Starting the training of the users of equipment, even where
there is some further development work to be completed on an equipment
programme, should allow the equipment to enter operational service
more quickly. (Paragraph 190)
MOD is developing principles and processes which
are intended to ensure that the Training Defence Lines of Development
(DLoD) are considered and supported as early as possible in and
subsequently throughout the development of a new capability. The
full consideration of training early in the development of a capability,
even before it relates to a specific equipment or suite of
equipment, will mean that the most efficient and effective training
solution is integrated with the programme's equipment and personnel
requirements. In order to support this programme, MOD is aiming
to develop a Training Solutions Envelope to guide other practitioners.
Efficient and effective delivery of the Training
DLoD is an integral aspect of Through Life Capability Management
(TLCM). It is the intent that MOD policy will mean a proposed
capability becomes a reality that has been developed holistically,
including the full range of related training (operator, maintainer
and higher tiers of training), will deliver the desired effect
and value for money. In addition, by addressing concurrently all
DLoDs elements of training should be ready as they are required.
This could mean the delivery of an equipment programme into service
more quickly.
47. (Recommendation 47) Cost increases on equipment
programmes have often arisen from 'requirement creep'—additions
and changes to the specification of equipment already ordered.
We note that the MOD is seeking to address this by acquiring equipment
which meets the vast majority—around 80%—of the military
customer's requirement, but which also has an 'open architecture'
allowing incremental upgrading and innovation to be added later.
This appears to be a sensible approach, but DE&S must ensure
that staff who work in project management have sufficient training
in key skills such as good change control. (Paragraph 193)
In addition to the answer provided to Recommendation
44 above (in response to paragraph 185 of the Committee's report),
the Project Management Licensing qualifications measure individuals'
competence across the whole of project management including change
control.
