Memorandum from the Ministry of Defence
(1) PSA TARGETS
Why does the Annual Report not use the standard
terminology for reporting performance against PSA targets, as
set out in Treasury guidance (PES 2006 18, Annex A)?
In reviewing top level performance against each
target in the department's quarterly PSA Reports, including the
Annual Report and Accounts, the Defence Management Board considers
how to express that performance in a way that is clear for the
reader and best reflects the nature of the assessment it is making,
particularly with regard to the level of risk being managed. The
Board has judged that where this is best served by variation from
the standard Treasury terminology (which is not drawn up with
military targets in mind), doing so best meets the spirit and
purpose of our reporting obligations. These assessments are visible
to Treasury officials.
(2) PSA TARGET
1
[Achieve the objectives established by Ministers
for Operations and Military Tasks in which the United Kingdom's
Armed Forces are involved . . . .]
(a) Over the year April 2006-March
2007, the proportion of regular forces deployed on operations
and other military tasks increased from just under 20%-21.4% (page
14). What is the percentage, overall and for each service, for
the first quarter of 2007-08 (April-June 2007)?
There have always been some minor differences
in the way the three Services have individually measured their
level of commitment to operations, reflecting their different
operating procedures and environments. We have been working to
regularise this for some time, and from 1 April 2007 they have
now been brought onto a fully consistent basis to measure the
proportion of the Armed Forces deployed on Operations and undertaking
Military Tasks. We have also changed the baseline for this figure
from total strength to trained strength. This means that these
figures are not directly comparable with those from previous years.
Given the discontinuity, we have provided a rough indication of
the previous quarter's activity levels compiled on the new basis.
This provides a degree of comparability with our previous reporting
(which stretches back to April 2001).
Between 1 April and 30 June 2007, 19% of the
Royal Navy, 25% of the Army and 17% of the Royal Air Force were
deployed on Operations and undertaking Military Tasks. In total,
some 22% of all regular forces were deployed on Operations and
undertaking Military Tasks. This was a decrease of 3-4% from the
previous quarter, reflecting the withdrawal of UK combat forces
from the Balkans at the end of March, continuing normalisation
in Northern Ireland, and continuing progress in building Iraq's
political institutions and its security capacity, counterbalanced
to some degree by the deployment of additional forces to Afghanistan.
The reduction in Royal Navy activity levels reflects the replacement
of 3 Commando Brigade by 12 Mechanised Brigade in Afghanistan
in April.
(b) What impact is the ending of Operation
BANNER in Northern Ireland on 31 July 2007 expected to have on
the proportion of each Service's trained strength undertaking
operations?
We have not yet formally assessed the impact
of the end of Operation BANNER on Activity levels; these are routinely
calculated in arrears every quarter and the full effect will not
be visible until figures for the third quarter of 2007-08 (September-December
2007) are published in the spring of 2008. We expect the end of
Operation BANNER in itself to reduce the proportion of the Army
deployed on Operations and undertaking Military Tasks by about
4% and of the RAF by about 2%. Overall published quarterly activity
levels will of course also reflect parallel reductions or increases
in the forces deployed on other operations and Military tasks,
so the net figures are unlikely precisely to match these numbers.
(3) PSA TARGET
3
[Generate forces, which can be deployed, sustained
and recovered at the scales of effort required . . ..]
(a) For each of the three indicators
for PSA Target 3, what are the percentages for the first quarter
of 2007-08?
Owing to the continuing high level of operational
commitment, we do not now expect to reach the target level by
April 2008. On average from July 2006 to June 2007:
— 65% of force elements reported no
critical or serious weaknesses against their required peacetime
readiness levels, against a target of 73% by April 2008;
— 58% of force elements reported no
critical or serious weaknesses against the ability to generate
from peacetime readiness to immediate readiness for deployment
on operations, against a target of 71% by April 2008; and
— 79.5% of force elements reported
no critical or serious weaknesses against the ability physically
to deploy on operations at what is likely to be the most demanding
level for many enabling functions (two medium scales and a small
scale concurrently), sustain in theatre and thereafter recover
to their home bases, against a target of 82.5% by April 2008.
(b) For each of the three indicators
for PSA Target 3, what are the percentages for each of the Services
for 2006-07?
This information is not available. Readiness
requirements are set for and reported against the individual Force
Elements that provide the building blocks of military capability,
and not by Service.
(4) PSA TARGET
5
[Recruit, train, motivate and retain sufficient
military personnel to provide the military capability necessary
to meet the Government's strategic objectives]
(a) An MoD press notice of 23 August
2007 provides "provisional" manning figures for the
Royal Navy and Royal Air Force as at 1 July 2007, and manning
figures for the Army as at 1 April 2007. What are the manning
figures for each of the Services as at 1 July 2007? When will
the manning figures as at 1 October 2007 be available?
Provisional Army Manning figures for 1 July
2007 and 1 August 2007, and provisional Tri-Service data for 1
September 2007 were published on 19 October on the internet and
in the Library of the House by the Defence Analytical Services
Agency in Tri-Service Publications 1 and 3, in accordance with
National Statistics publication regulations. Provisional Tri-Service
data for 1 October 2007 will be published later this month.
(b) Table 19 on page 161 sets out,
for each Service, the Trained Requirement and Trained Strength.
What is the MoD's current forecast for the likely Trained Requirement
and likely Trained Strength for each Service as at 1 April 2008?
The personnel requirement for 1 April 2008 set
out in the MoD Defence Plan 2007 was:
| — Royal Navy:
| 36,260 |
| — Army: | 101,855
|
| — Royal Air Force: | 40,790
|
| |
The Defence Management Board last reviewed the forecast for
the likely trained strength when considering likely performance
against the Public Service Agreement manning balance target for
the 2007-08 First Quarter Performance Report, at which time the
predicted Trained Strength for 1 April 2008 was about:
| — Royal Navy: | 34,800
|
| — Army | 99,300 |
| — Royal Air Force: | 40,800.
|
| |
(c) A Parliamentary Written Answer of 17 July 2007
provided a list of "pinch point" trades in each of the
three services. What is the latest position on "pinch point"
trades and the percentage shortfall against each? What progress
is being made to address the shortfalls?
A manning pinch point is defined as "a trade, or area
of expertise where there is insufficient trained strength to perform
directed tasks. This might be as a result of adherence to single-Service
harmony guidelines, under-manning, and/or levels of commitment
that exceed the resourced manpower ceiling for the trades or areas
of expertise involved." The most recent position is set out
below. The Department has put in place a range of short and long
term measures to ameliorate this situation. This includes training
and recruitment initiatives, financial retention and re-engagement
incentives, flexibility in the rank employed in some posts, the
mobilisation of Reservists, some contractorisation where appropriate,
and regular reviews of force levels required for each operation.
Reducing force levels in Iraq should also help relieve some pressure.
|
| ROYAL NAVY | Percentage
shortfall
|
|
| Merlin Pilots | 39 |
| Merlin Observers | 47 |
| Merlin Aircrew | 22 |
| Leading Hand Warfare | 29 |
| Able Bodied Diver | 15 |
| Royal Marines Other Ranks | 9
|
| Leading Hand Air Engineering Technician |
36 |
| Petty Officer Mine Warfare | 44
|
| Able Bodied Warfare Specialist (Sensors Submariner)
| 27 |
| Able Bodied Warfare Specialist (Tactical Submariner)
| 23 |
| Strategic Weapons Systems Junior Ranks Nuclear Watchkeepers
| 26 |
|
| |
|
| ARMY | Percentage
Shortfall
|
|
| Royal Electrical and Mechanical Engineers Vehicle Mechanic
| 8 |
| Royal Electrical and Mechanical Engineers Recovery Mechanic
| 14 |
| Royal Electrical and Mechanical Engineers Armourer
| 13 |
| Royal Engineers Clerk of Works | 17
|
| Army Medical Service—General Surgeon |
50 |
| Royal Engineers Mechanical Engineer Fitter |
22 |
| Royal Logistics Corps Ammunition Technician
| 23 |
| Royal Logistic Corps—Postal and Courier Operator
| 10 |
| Infantryman Private and Corporal | 10
|
| Army Medical Services—Radiographer |
29 |
| Royal Engineers Military Engineer Geographic
| 26 |
| Intelligence Operational Military Intelligence
| 10 |
| Royal Engineers Explosive Ordnance Disposal
| 29 |
| Royal SIGNALS Information Systems Engineer |
2 |
| Royal Engineers Command, Control and Communications Systems
| 23 |
| Army Medical Service—General Medical Practitioner
| 18 |
| Royal Logistics Corps Chef | 8
|
| Army Medical Services—Operation Department Practitioner
| 45 |
| Royal Logistics Corps Petroleum Operator |
4 |
| Adjutant General's Corps—Military Administrator
| 13 |
| Royal Artillery —Operator Unmanned Aerial Vehicle
| 48 |
| Army Medical Service—Nurse Officer |
36 |
| Army Medical Service—A&E Nurse Officer
| 45 |
| Army Medical Service—Anaesthetist |
46 |
| Army Medical Service—Radiologist |
80 |
| Army Medical Service—Orthopaedic Surgeon
| 62 |
| Army Medical Service—Intensive Therapy Unit Nurse Officer
| 39 |
|
| |
|
| ROYAL AIR FORCE | Percentage
Shortfalls
|
|
| Medical | 28 |
| Operational Support (Intelligence) | 2
|
| Operational Support (RAF Regiment) | 13
|
| Operational Support (Provost/Security) |
10 |
| Princess Mary's RAF Nursing Service | 19
|
| Weapons Support (Air Load Master) | 11
|
| Weapons Support (Linguist) | 21
|
Air Traffic Control/ Flight Operations Manager/
Flight Operations Assistant—Sergeant
|
9 |
| Firefighter | 10 |
| Gunner | 14 |
| Movements Operations/Controller | 1
|
| Motor Transport Technician | 17
|
| RAF Police | 7 |
| Staff Nurse (RGN) A & E | 14
|
|
| |
(d) The Written Answer showed substantial shortfalls
relating to pilots, observers and aircrew for Merlin Helicopters.
What impact are these shortfalls having on current operations
and what impact will they have when the six new Merlin helicopters
come into service in 2008? Will there be sufficient crew to operate
these six helicopters?
The majority of RN Merlin crew shortages are held against
non operational front line appointments which require RN Merlin
operational experience. There are also some gaps in the Merlin
Force in the training fleet as opposed to the front line, but
there is at present no significant impact on current operations.
The six new Merlin helicopters are for the RAF, not the RN, and
their operation will therefore be unaffected by RN manpower shortages.
(e) Table 24 on page 166 shows that all three Services
did not meet their targets for "UK Ethnic recruitment".
What action is being taken to improve performance in this area?
Why does the RAF appear to have a particular problem?
The Department has an annual Action Plan with specific diversity
targets to increase UK ethnic minority recruits by 0.5% above
the previous year's achievement, or rolling forward the previous
year's target where this would provide a greater challenge. Targets
for 2007-08 are: Navy 3.5%; Army 4.3%; RAF 3.6%. As set out in
the Essay on Improving Service Diversity on page 173 of the Annual
Report and Accounts, the Armed Forces have an active programme
to improve recruiting among the United Kingdom's ethnic minority
communities. The Army and Royal Air Force received Gold Awards
from Opportunity Now in 2006 and the Royal Navy a silver award
in 2005. In the Race for Opportunity scheme the Army came top
among public sector organisations for the 6th consecutive year,
RAF 3rd and Navy 5th. Of the 104 public and private sector employees
who participated, the Army was 5th and the RAF 10th, an improvement
on previous years' assessments. Each Service has a dedicated team
raising awareness of Armed Forces careers amongst the UK's minority
ethnic and faith communities. Activities include:
— presentations in schools, colleges and to Community
and Faith leaders;
— providing role models to young members of ethnic
minorities and faith communities;
— organising and operating Personal Development
Courses;
— attending careers fairs, and cultural and religious
festivals and events;
— Community Liaison Officers working within regional
networks to engage potential recruits and their gatekeepers; and
— arranging visits for ethnic minorities to military
bases.
There are a number of factors currently challenging ethnic
minority recruitment which broadly affect each of the three Services:
commonly held aspirations of young members of ethnic minorities;
prevalent views on current operations amongst ethnic minority
communities; and concerns about ethnic imbalances and racism in
the Armed Forces in general. However, of the three Services, the
RAF's recruitment patterns have been most affected in recent years
by the personnel reductions set out in the July 2004 Future Capabilities
White Paper. As a consequence, recruitment opportunities in the
RAF have been particularly limited, reducing the overall number
of new RAF recruits and the number of new ethnic minority recruits
and thus constraining the scope for change in the proportion of
personnel from ethnic minorities across the RAF as a whole. Moreover,
members of ethnic minority communities with high aspirations and
the necessary educational qualifications for RAF entry have not
generally considered the Armed Forces as a career of first choice,
and awareness and knowledge of RAF careers in ethnic minority
communities has traditionally been poor compared with the Army
and Royal Navy. As a result of this legacy and the nature of Service
career progression, there are at present fewer role models in
the RAF who can reach out to and motivate potential recruits from
ethnic minority communities compared to the RN and the Army. The
RAF marketing campaign and the work of the RAF Motivational Outreach
Team are both intended to counterbalance these challenges.
(f) What is the latest position regarding Armed
Forces ethnic minority representation for each of the three Services
and the Armed Forces overall (Table 25 on page 166)?
Ethnic minority data is published quarterly on the Internet
and to the Library of the House by the Defence Analytical Services
Agency in Tri Service Publication 3 in accordance with National
Statistics publication regulations. The most recent data, for
the Royal Navy and RAF for 1 July 2007, were published on 23 August
2007. Tri-Service data for 1 October should be published later
this month.
(g) The Army and the RAF did not meet individual
or unit harmony guidelines in 2006-07 (page 21). What are the
latest available figures for the performance against individual
and unit harmony guidelines for each of the three Services?
The latest figures are:
|
| Levels of Individual Separated Service against Harmony Guidelines
|
| Guidelines | Performance
|
|
Royal Navy /
Royal Marines |
In any 36 month period, no one to exceed 660 days separated service.
| Fewer than 1% of Royal Navy personnel exceeding 660 days separated service.
|
| Army | In any 30 month rolling period no one to exceed 415 days separated service.
| 10.3% of Army personnel exceeding 415 days separated service.
|
| Royal Air Force | Not greater than 2.5% of personnel exceeding 140 days of detached duty in 12 months.
| 6.7% of Royal Air Force personnel exceeding 140 days of detached duty.
|
|
| | |
|
| Unit Tour Intervals against Harmony Guidelines
|
| Guidelines | Performance
|
|
| Royal Navy | Fleet Units to spend maximum of 60% deployed in a three year cycle.
| The Royal Navy continues broadly to meet its Unit Tour Interval Harmony guidelines.
|
| Army | 24 month average interval between unit tours.
| The following front line corps were exceeding unit tour interval guidelines:
— Infantry (15.8 months);
— Royal Artillery (19.2 months);
— Royal Engineers (18.3 months).
Some specialist units, particularly in the Combat Service Support trades, had shorter tour intervals.
|
| Royal Air Force | Unit tour intervals to be no less than 16 months.
| Unit Tour Intervals are not easily measured for the Royal Air Force. However:
— The Harrier, Nimrod and Air Transport fleets remain heavily committed;
— Elements of Joint Helicopter Command, Harrier, Tactical Imagery-Intelligence Wing, Nimrod, Tactical Medical Wing, 90 Signals Support Unit and the RAF Regiment are breaking unit tour interval guidelines
|
|
| | |
(5) 2004 SPENDING REVIEW
EFFICIENCY TARGET
(a) In written evidence to the Committee following
its October 2006 hearing, the MoD provided some further information
on the results of the 2002 Spending Review "value for money
target"[9],
but not the outturn data for each of the components of the target
or the final overall position. What is the MoD's final assessment
of performance against the 2002 Spending Review vfm target?
The Department achieved the 2002 Spending Review value for
money target overall. As set out in paragraphs 269-70 and table
16 of the 2005-06 Annual Report and Accounts, the Department at
that time judged that, on the basis of the lower end of the range
of forecast achievement against the Defence Logistics Organisation's
Strategic Goal in 2005-06 (£350 million), which was at that
time still subject to validation, it had met the overall 2002
Spending Review target of 10%. As reported to the Committee, the
Defence Logistics Organisation in fact achieved £475 million
of efficiencies against the Strategic Goal, substantially exceeding
the amount required.
(b) The NAO report, The Efficiency Programme: A
Second Review of Progress (HC 156-I Session 2006-2007), examined
three MoD efficiency projects (pages 48-49 of NAO report). The
NAO rated the measurement methodologies for each of the programmes
as "Amber" (the reported figures represent efficiencies,
but carry some measurement issues and uncertainties). How is the
MoD addressing the concerns identified by the NAO?
The projects referred to are:
— The Defence Logistics Transformation Programme.
The NAO has observed that the efficiencies claimed include savings
in depreciation, and that this is in line with centrally-issued
(ie Treasury) guidance. It was concerned that there is a risk
that measuring such reductions in depreciation may lead to perverse
incentives or simply be an accounting exercise with no real efficiency
improvement taking place;
— Army Manpower. The NAO has observed that while
all the manpower reductions are defence policy compliant, they
include headcount reductions in front line personnel as well as
administrative and support posts; and
— Fast Jets. The NAO has observed that the element
arising from earlier decommissioning of fighters and missiles
(about 20%) only represents a financial saving over the period
of the original budgets up to the original decommissioning date
of 2008-09. It has noted that this can be scored within OGC guidelines
and has allowed redirection of resources to other defence priorities,
but in its view they cannot be considered sustainable.
As the NAO has observed in its comments, the Department is
working within the central guidelines laid down by the Treasury
and Office of Government Commerce on how efficiencies under the
2004 Spending Review efficiency programme should be measured and
scored. As set out in the responses to questions 5(a) and 5(c),
the Department has a robust approach to measuring and validating
the very substantial efficiencies achieved by the Defence Logistics
Transformation Programme and the Defence Logistics Organisation's
original Strategic Goal. The Defence Logistics Transformation
Programme benefits have been audited by Defence Internal Audit
(MoD's independent provider of systems appraisal) since 2004-05.
In its July 2007 report on Transforming logistics support for
fast jets the NAO concluded that Tornado and Harrier costs have
reduced from £771 million in 2001-02 to £328 million
in 2006-07, providing a cumulative saving of some £1.4 billion
over the six-year period, that the Department continued to achieve
broadly the same level of performance in terms of flying hours
throughout the transformation, that consequently the Department's
transformation of logistics support represents good value for
money to date and that although there are risks, the Department
is working to manage them. Overall, therefore, the Department
judges that it already has appropriate and proportionate processes
in place to provide assurance that it is achieving the efficiencies
it claims in accordance with central guidelines.
(c) The Annual Report (paragraph 152, second bullet)
states that, for the Defence Logistics Transformation Programme,
"work is in hand to validate the efficiencies achieved in
2006-07". Has the validation now been completed and, if so,
what was the outcome?
Defence Internal Audit has now completed its audit of the
new benefits being claimed by the Defence Logistics Transformation
Programme (DLTP) in 2006-07. As a consequence, £360 million
of new input benefits have been validated. These include some
non-repeatable efficiencies. The audit also verified achievement
of £139 million of output benefits. The DLTP cumulative achievement
to the end of year was £1,030 million, against the range
of £780-830 million published in the Department's Annual
Report and Accounts.
(d) In his statement to the House on 25 July 2007
on the Comprehensive Spending Review settlement for defence, the
Secretary of State said that "we will make savings against
the Department's overheads, including a 5% year-on-year saving
in our administrative overhead over the next three years and a
25% reduction in our head office. These are additional to the
£2.8 billion efficiencies delivered over the spending review
2004 period". How does the MoD plan to make a 25% reduction
in head office costs and over what period will the reductions
be delivered?
This will be delivered through the Head Office streamlining
programme established in parallel with the MoD's Capability Review
(see question 9(b) below). Detailed proposals are set out in the
attached consultation document, published on 23 October.
(6) DEPARTMENTAL RESOURCE
ACCOUNTS 2006-07
(a) There was a £150 million under-spend on
the Capital-DEL budget (Table 15 on page 154). The Annual Report
explains that this was "due to receipts from estates disposal
in a PFI project" (paragraph 285). What project was this,
and what were the circumstances of the disposal?
The receipts arose from the first disposal of estate assets
within Project MoDEL (MoD Estate in London). Project MoDEL will
combine the operations from a number of Defence sites within Greater
London, providing improved facilities and quality of life for
about 1,800 personnel subsequently based at RAF Northolt and freeing
up to 100 hectares of predominantly brownfield land within the
M25 for development. Estate disposals will take place through
to 2012.
(b) The Resource Accounts for 2006-07 have been
qualified by the C&AG because net expenditure was nearly £21
million (1.4%) more than the Estimate for Request-for-Resources
2, mainly because of higher than expected use of guided weapons
and bombs in Afghanistan and depreciation costs associated with
capital spares used in-theatre. What are the emerging findings
of the MoD's review into the causes of the Excess Vote, and what
measures are likely to be needed to avoid a future repetition?
What discussions has the MoD had with the Treasury about reintroducing
a contingency element for RfR-2 Estimates?
Following the Defence Committee's criticism of the size of
the contingency included in the previous year estimate, in 2006-07
the MoD provided a taut and realistic forecast without a contingency
element. This meant that that even a relatively minor change in
the tempo of operations had the potential to cause an excess vote.
Working with the NAO, the Department has identified areas where
our reporting and forecasting systems can be improved and allocated
these to the appropriate areas for remedial action. The NAO will
undertake a review at the mid-year point of 2007-08 to ensure
that our systems are robust. The Department is also implementing
processes to improve data capture for reporting writes-off, impairments
and other charges relating to RfR2, including use of guided weapons,
missile and bombs, to ensure costs are correctly charged and additional
expenditure identified in time to be included in the Spring Supplementary
Estimates. We will be discussing with Treasury the reintroduction
of a small contingency element to anticipate any unforeseen increases
in cost.
(c) RfR-2 Capital expenditure was lower than expected
in both Iraq and Afghanistan, because not all UORs that were approved
were delivered within the year (page 239, paragraph 2.5). To what
extent does this reflect delays in delivery of UORs, and what
UORs were affected?
The lower than expected expenditure on Urgent Operational
Requirements does not reflect a delay in delivery. Rather it reflects
an earlier over-estimate of the rate at which approval levels
translated into actual spend.
(d) Paragraph 183 of the Annual Report describes
financial control failures resulting from teething problems with
the Joint Personnel Administration (JPA) system, some of which
were expected to be dealt with "by autumn of 2007".
When does the MoD expect to have resolved all the outstanding
problems?
As set out in the Annual Report and Accounts, the Joint Personnel
Administration system has now been successfully rolled out across
all three Services. It is delivering effective front office personnel
and payroll administration and is providing management information
that broadly meets the Department's business needs. However, it
has not yet delivered its full potential management benefits as
work continues to improve back office financial accounting functions
and the quality and timeliness of personnel data. Software developments
in this area planned for the summer and autumn of 2007 have been
delivered as intended, although some will only be used generally
for the first time in November following the processing of the
October payroll. Investigation of control account balances continues.
Some further problems have been identified with the way that in-service
and post-discharge debts are managed, and this may lead to further
process and systems changes. Progress is kept under review by
the Defence Audit Committee on behalf of the Accounting Officer,
and is visible to the National Audit Office, but it is unlikely
that all the known issues will have been resolved by the end of
this financial year.
(7) FINANCIAL SAVINGS
An MoD press notice of 27 June 2007 says that a DE&S project
team has combined MoD's office supplies requirement with those
of eight other Government departments in the biggest ever public
sector reverse auction to generate combined savings over existing
spending of £100 million over the next four years—a
saving of £50 million for MoD over the life of the contract.
Is the MoD working with other Government departments / public
bodies to identify other areas where a similar approach could
deliver financial savings? If so, in what areas and what sort
of savings might be delivered for the MoD?
MoD's Category Management approach extends beyond office
supplies to a range of commodity categories and services that
apply not only pan- defence but also pan-Government. MoD is an
active member of the Office of Government Commerce's (OGC) pan-Government
Commodity procurement stakeholder groups and is planning further
collaboration with a number of other Government departments across
a range of categories. Details are below. Collectively this represents
a significant level of collaboration by MoD, with the department
leading in some areas. Category Management has already delivered
£250 million cash benefit to MoD. Existing arrangements include:
— MoD's Information Communications Systems catalogue
has been used by other Departments for several years. Savings
have been in the region of 20% in this volatile fast moving market.
In addition MoD is to become the lead for Government's basic IT/IS
information assurance requirements, which will include the Foreign
and Commonwealth Office (FCO) and extend to other departments
in time.
— MoD's Print Contract is open to use for any other
department. MoD's own Print Manager can also call-off the Department
for Transport's recycled paper framework. Savings from April to
July, as a result of using the collaborative arrangement were
£6.1K.
— MoD is collaborating with the Office of Government
Commerce Buying Solutions (OGC b.s.) on furniture, where the department's
spending power adds weight to OGC b.s.' overall ability to leverage
the market. Predicted MoD savings are £0.5 million per year.
Other public sector bodies expected to commit to this arrangement
include the Department for Environment, Food and Rural Affairs
(DEFRA), the Home Office, the Department for Transport, the Ministry
of Justice, and Lancashire County Council.
— The National Health Service Purchasing and Supply
Agency (NHS PaSA) is leading the pan-Government tender for Water
Coolers and Dispensers. This will have a significant effect on
the MoD's sustainability targets. The MoD is also collaborating
with the FCO on travel arrangements and the Electronic Booking
Interface Service. The Home Office has also expressed an interest.
— The MoD has made significant savings through using
the Department of Works and Pensions management consultancy framework,
plus its own Gate and Governance process for all management consultancy
requirements. The department is also collaborating on a Consultancy
work-stream—one of three within the Consultancy Value Programme.
— The MoD is collaborating with OGC, OGC b.s, NHS
PaSA, DEFRA, and Local Government (Regional Centres of Excellence)
on an energy pilot. Work is underway on a collaborative half-hourly
electricity contract requirement, led by PaSA. DEFRA are leading
on potential gains from a cross government approach to emissions
trading liabilities.
Planned collaboration includes:
— The MoD, OGC b.s. and the Higher Education Institute
will begin collaborating on print output from May 2010 and work
is underway to collaborate across IT/IS hardware and software.
No projected benefits are available yet.
— The MoD is a member of the Office Solutions Collaborative
Category Board and will participate in formulating the pan-government
strategy for stationery, print, paper, multi-functional devices
and post and courier services.
(8) DEFENCE AGENCIES
A Parliamentary Written Answer of 29 June 2007 provided a list
of MoD Executive Agencies (8) and Trading Funds (5). Are further
changes to the number of Executive Agencies and Trading Funds
planned?
The MoD keeps the business models of all its agencies under
regular review to ensure that Next Steps status continues to be
the best means of supporting wider defence outputs. The number
of agencies in the department has decreased substantially over
the last few years as the benefits derived from agency status
have become embedded within the wider department. We are currently
reviewing the status of the Defence Analytical Services Agency
and the Defence Medical Education and Training Agency. No decisions
have been made or conclusions reached on whether or not to change
their status as Executive Agencies as this work has not concluded
and Ministers have not yet been consulted.
The Minister of State for the Armed Forces announced the
merger of ABRO and DARA Trading Funds to Parliament on 25 July
2007.
(9) CAPABILITY REVIEW
(a) What progress has been made against the MoD
Action Plan which set out how the MoD planned to address the issues
identified in the Capability Review which was published on 27
March 2007?
The Defence Management Board (DMB) set a number of specific
six month objectives. The Department is making good progress across
the four Areas for Action.
Area for Action 1 (Strengthen the corporate leadership of the
Department)
We committed to:
— the DMB championing a defence wide statement of
what we stand for and how we work; and
— an accessible statement of Departmental strategy
in a single document incorporating the business strategy necessary
to deliver continuous improvement.
We have in place a Board development programme addressing
the drivers behind the Review's observations on corporacy. A group
led by the Permanent Secretary and Chief of the Defence Staff
is considering proposals for a departmental strategy, which is
being developed alongside the normal departmental planning process
following a spending review.
Area for Action 2 (Clarify and simplify the MoD's operating model)
We committed to:
— agreeing a new structure for the top of the Department
which is simpler, and will have reduced the number of committees;
— generating a new departmental business model,
setting out the future roles and relationships of the Centre and
other TLBs; and
— undertaking a review of Head Office to define
its future functions and broad structure.
Details are set out in the Head Office Streamlining consultation
document.
Area for Action 3.1 (Punch our weight in Whitehall and work more
closely with others)
We committed to:
— developing a strategy to promote the reputation
of Defence among key stakeholders inside and outside government;
and
— agreeing processes for joining-up cross-Government
strategic analysis and planning on security issues.
We have taken forward work on identifying the underlying
causes of the Department's perceived insularity and developed
possible solutions, and are providing a team to support the Cabinet
Office on drafting the first UK National Security Strategy.
Area for Action 3.2 (Defence Industrial Strategy Implementation)
We committed to:
— agreeing, publicising and delivering on demanding
Defence Industrial Strategy delivery milestones for 2007-08 and
reflecting these in senior staff objectives;
— making the merged DE&S an organisation that
contributed to overall improvement in Defence acquisition;
— being judged by industry as having delivered on
transparency; and
— establishing a commercial framework with Through-Life
Capability Management embedded.
We have achieved these and we are on course to agree a Transparency
Policy that allows industry to align their forward investment
plans.
Area for Action 4 (Redouble our efforts to build MoD's human capability)
We committed to:
— DMB members re-emphasising line managers' responsibilities,
and leading by example in people management;
— changing the civilian appraisal system so that
managers are judged on their development of staff;
— delivering an incentivising package for key acquisition
posts;
— implementing more structured civilian performance
assessments;
— agreeing civilian succession planning with the
Cabinet Office, and changing our internal processes (both military
and civilian) to ensure that greater account is taken of department's
corporate needs when succession planning;
— updating the Department's diversity programmes;
and
— agreeing and implementing measures for increasing
internal promotions to Senior Civil Service and feeder grades.
We have changed the appraisal system for civilians, developed
the incentivising package for acquisition specialists, set in
train more rigorous performance assessment programmes, updated
the criteria for, and Defence Management Board engagement in,
Senior Appointments Committee work for the military, and updated
the diversity programme. However, the nature of the streamlining
programme will increase the challenges associated with refreshing
the Senior Civil Service and feeder grades.
(b) The MoD response to the Capability Review envisages
delivering a zero-based review of the "head-office operating
model" "by the autumn". What are the emerging findings
of this review?
These are set out in the attached copy of the Streamlining
consultation document.
(10) COMPREHENSIVE SPENDING
REVIEW
(a) What progress has been made in developing a
price index for defence products? Does the MoD have estimates
for defence inflation in each of the years of the CSR07?
Earlier approaches to build a price index for defence products
using information supplied by defence companies to the Office
of National Statistics' (ONS) existing sample survey of producer
prices has failed to deliver a sufficiently robust measure. Work
is now underway to assemble an index combining details of all
the "Variation of Price" clauses applied to MoD "Fixed
Price" contracts (which are based on weighted combinations
of existing ONS price indices), with appropriate "deflators"
for all "Firm Price" contracts (which are invariant
to inflation) and allowance for price increases in MoD's "commodity
purchases", making use of appropriate information from existing
ONS indices.
The MoD does not have estimates for defence inflation for
the years of the CSR07. The MoD uses the Gross Domestic Product
deflator (currently 2.7%) as the measure of overall inflation,
in line with all Government Departments.
(b) In his statement to the House on 25 July 2007,
the Secretary of State announced that the MoD would be placing
orders for two aircraft carriers. The aircraft carriers will cost
around £3.9 billion. When the Committee examined the future
carrier programme, it was told that the cost of the two ships
would be just over £3 billion.[10]
How will the increased costs on this programme, just under £1
billion, be funded?
Industry has committed to manufacture the CVF at an Initial
Target cost of £3.9 billion. However, the Aircraft Carrier
Alliance is incentivised to drive costs below this before a Final
Target Cost is agreed by 2010. As the Department set out to the
Committee in previous evidence (HC822, Ministry of Defence Annual
Report and Accounts 2004-05: Sixth Report of Session 2005-06,
Ev26-27) it is impossible to hypothecate the impact of changes
in the estimated cost of individual projects to specific changes
in the overall programme. As part of the Department's routine
planning process we review the underlying plans and assumptions
which make up the Equipment Programme. This takes into account
changes in the strategic background, fresh operational experience,
alterations to project plans, assumptions and risks—which
may include both increases and decreases in forecast costs—and
pressures elsewhere in the Department, with reference to the outcome
of Spending Reviews. All these factors have to be weighed and
our plans and assumptions about the Equipment Programme adjusted
accordingly to ensure that we are still able to deliver the balanced
military capability our forces requires within the funds available
for Defence. Consequently, whilst it is inevitably the case that
if we have to spend more resources on one project, less will be
available for other purposes, there is not a simple relationship
between increased costs of one project and reduced spending elsewhere;
the adjustments the Department makes are the result of the interplay
of a wide range of issues across the Defence budget as a whole.
(c) The CSR report [Cm 7227, p233] sets the MoD's
CSR settlement against a "baseline" for 2007-08. What
significant areas of expenditure are in the baseline (£32.579
billion) but are excluded from the MoD expenditure figure (£33.561
billion) in Public Expenditure Statistical Analyses 2007 [Cm 7091,
Table 1.12], to account for the approximately £1 billion
difference?
The Comprehensive Spending Review (CSR) settlement baseline
is derived from the 2004 Spending Review settlement for 2007-08.
The Public Expenditure Statistical Analyses (PESA) figure for
2007-08 is derived from Main Estimates 2007-08. Both figures are
for "total DEL", which is RDEL + CDEL minus
depreciation and impairments.
There a number of (predominantly technical) differences between
these figures:
— there has been a budgetary regime change in relation
to stock write-offs in 2007-08, reflected in the latest Consolidated
Budgeting and Guidance. The 2007-08 figure in Estimates and PESA
reflects a lower depreciation charge, where, under the previous
regime, stock write-off were not considered part of depreciation
in calculating Total DEL. This correspondingly increased our Total
DEL figure by £272 million—although our near cash position
is unaffected;
— similarly, we made a number of adjustments within
our Indirect RDEL budget for Main Estimates, reflecting expected
higher cost of capital charge and release of provisions in 2007-08
amounting to some £351 million. This was balanced by a reduced
forecast for depreciation of the same amount (£351 million).
As above, because the Estimate shows a reduction in depreciation,
there is a corresponding increase in the value of the Total DEL
figure compared to our CSR baseline, which doesn't reflect in-year
fluctuations in the composition of non-cash;
— baselines for Spending Reviews are set excluding
time-limited ring-fenced budgets. For MoD, this meant the discontinuation
in CSR07 of the Defence Modernisation Fund, reducing our baseline
by £146 million Direct RDEL and £190 million CDEL;
— Main Estimates include £44 million RDEL Direct
for programmed conflict prevention activities in RFR2 for 2007-08
funded from the Conflict Prevention Pools. Funding for such activities
is not reflected in the Defence baseline as the conflict prevention
pool is settled separately; and
— a number of other minor technical adjustments
also come into play, such as the discontinuation of a number of
PES transfers into and out of the Department that do not reflect
Machinery of Government changes.
12 November 2007
9
Defence Committee, Ministry of Defence Annual Report and Accounts,
Second Report of Session 2006-07, HC 57, Ev 35 Back
10
Defence Committee, Future Carrier and Joint Combat Aircraft
Programmes, Second Report of Session 2005-06, HC 554, paragraph
14. Back
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