|
ARA 03
Supplementary memorandum from the Ministry of Defence
RESPONSES TO COMMITTEE LETTER OF 11 NOVEMBER - EVIDENCE FROM THE PERMANENT SECRETARY & FINANCE DIRECTOR (4 Nov 2008)
Q.1. More details about the 'eschewed costs exercises' referred to in Question 5. [Q 5] This question is based on a misunderstanding caused by a transcription error which we have sought to correct. Sir Bill Jeffrey actually referred to a 'should cost' exercise. As he explained, we are looking to employ benchmarking techniques more systematically in the future. Q.2. Confirmation as to whether The Department is undertaking work to develop and cost a recuperation programme to restore full contingent capability once operational commitments return to the level within Defence Planning Assumptions. We plan to restore contingent capability (albeit recognising lessons learnt from current operations) in accordance with Departmental priorities - beginning with the ability to conduct Small Scale operations and, at later dates, more demanding Medium and Large Scale operations.
We simply do not know how long it will
take to restore a generic contingent capability in line with Defence Planning
Assumptions. Timescales will be heavily
dependent on the tempo of continuing operations - particularly the level of
commitment in
In the short term we continue to retain a very limited contingent capability. However, were circumstances such that we needed to commit a larger force before 2017 it would be possible if we judged it a higher priority than support to current operations and if we were prepared further to breach harmony.
Q.3. A copy of the MOD's detailed measurement
and delivery plans for its new DSO targets (please refer to p 11, paragraph 1.7
of the Performance of the MOD 2007-08, by the In accordance with the Treasury requirement the MOD published a document "The MOD Departmental Strategic Objectives 2008/09 - 2010/11" on the MOD internet website on 25 February 2008. This document set out how we intended to report against Departmental Strategic Objectives. The document remains available at:
The Defence Plan 2008-2012 (Cm 7385), published in June 2008, also gives further detail on how the Department is reporting against PSAs and DSOs. In addition, our response to Question 12 of the Committee's prior written questions dealt with the detailed reporting against DSO 1.1. and DSO 2.1.
Q.4. MOD's current estimate of Defence Inflation and the MOD's current estimate of when this work will be completed. [Qq 16-23] The programme of work underway to
develop a robust measure of inflation for total defence expenditure will
produce publishable estimates for FY 07/08 and FY 08/09 by April 2010. For FY 09/10 we hope an estimate will be
produced in September 2010; this cannot be produced earlier because data for
some
Amalgamation of these work-strands will lead to a measure of inflation in the input costs of Defence (the goods and services we purchase and the wages we pay). We cannot measure changes in the output cost of Defence as we have no quantitative measure of Defence outputs, but would expect inflation in Defence output costs to be lower than that of input costs, thanks to efficiencies and productivity improvements in delivering outputs. It is also important not to confuse Defence Inflation with the escalation in unit cost of defence equipment. The latter tends to run above deflator inflation, because new generations of defence equipment are much more capable, than their predecessor.
Constructing a measure of inflation for equipment projects is a complex exercise. For example, most major equipment projects have 'variation of price' (VOP), clauses, relating to a particular industry index or range of indices. Details of VOP clauses are not stored centrally and appropriate details have to be obtained for each contract separately. Each contract's VOP arrangement is different. VOP clauses are a collection of formulae that use a wide range of price indices and exchange rates.
A prototype database for storing contract VOP details has been built. Processes for matching data to contracts payment data and to price index data should be complete by December 2009.
Latest estimates, based upon 123 contracts which we have been able to match to expenditure data, account for around £2.5bn annual expenditure. The average inflation rates for these was 3.6% in the year 2006/07 to 2007/08. For the top 10 contracts the rate ranged from 1.7% to 5.3%.
Q.5. More details about how the new SPVA Chief Executive intends to build up the level of satisfaction with the JPA system. [Q 33]
A number of initiatives are currently being taken forward. The JPA I-Expenses Interface Review seeks to identify the potential options for improving the self service user's experience of the Interface. 47 "usability" issues were raised by the single Services ranging from simplifying the user guide, providing additional help screens and simplifying the input for Disturbance Allowance. 35 JPA system amendments are planned to be delivered by August 2009 and 12 non-system (process and documentation) changes will be completed in the same timescale. This will make the i-expense package much easier to use. Further improvements, will depend on simplifying allowance policy. This review has already been commissioned by the Service Personnel Policy Branch.
Q.6. A breakdown of the £2.3M additional costs which have been incurred by SPVA as the result of problems in implementing JPA and the reasons for those costs. [Q 35] The table below provides the detailed breakdown of the £2.3m of additional costs incurred by SPVA as the result of problems encountered whilst implementing JPA:
These additional staff costs were required to provide additional support during the Army's transition to a fully self-service environment; to respond to unforeseen problems in relation to the Department's financial accounting requirements; and the creation of the Service Requests Management Group, to provide a one-stop-shop query service for customers.
Q.7. The number of data security accreditors currently within the MOD and clarification as to whether these posts are exempt from the streamlining/efficiency process? [Q 56] We currently have 47 accreditors in Defence Security and Safety Assurance (DSSA), fulfilling the central accreditation role. Top Level Budgets and Front Line Commands have delegated responsibility for self-accreditation of systems operating at "Secret" level and below that are "stand alone" with no connectivity to other MOD networks. A further six accreditors work in these areas and have a functional responsibility to the DSSA. All accreditors are located outside London HQ and have not been included in the Streamlining exercise. We have a professional development scheme for accreditors, completion of which lends to a Recruitment and Retention allowance. We are acutely aware of the seriousness of data losses and provision has been obtained for an additional nine accreditors, for whom recruitment action is in hand. This will raise the total number of accreditors to 62 in the MOD. In addition, MOD has established a Head of Profession for accreditation and work is underway to establish a competence framework consistent with that being prepared by the Cabinet Office.
Q.8. The disciplinary consequences for staff who have acted negligently with data? Sir Edward Burton's report said that only the most recent serious loss of data "appears to have led to disciplinary proceedings" (p 2, para 7); and why disciplinary action was not taken following other serious data loss incidents? [Q 58] MOD
has always had processes in place
Decisions
on whether
Q.9. Whether the MOD will brief the Committee about the MOD's performance against the equivalent DSO 1 next year? [Q 64] We will provide external reporting against the new DSO1 throughout the year in Quarterly reports and the target will receive appropriate coverage in the Annual Report and Accounts next summer. Whether the Committee requests a confidential briefing from the Department is, of course, a matter for the Committee. Q.10. Details of when the Committee can expect to
receive a note on the MOD's assessment of how to restore full capability
following current operations in The Committee will receive an oral briefing early in the New Year.
Q.11. A list of the force elements where readiness has been reduced. [Qq 90-92] (Answer to be provided separately)
Q.12. Up-to-date figures of the level of defence research spending funded by the MOD over the last 15 years. [Q 125] Research is essential for the delivery of battle-winning military capability now and in the future. MOD's research spend is published as a matter of public record, set out in the MOD's annual statistical compendium, 'UK Defence Statistics', copies of which are in the library of the House. As National Statistics, the MOD R&D numbers are required to be collected under a set of internationally agreed definitions known as Frascati guidelines. These, amongst other things, require us to provide the widest possible coverage of the R&D activity undertaken by the Department. A detailed explanation on how the MOD R&D statistics are compiled can by found in DASA Defence Statistics Bulletin No.6, a copy of which is available in the Library of the House The most recently published figures for net MOD research spending (as reported in the year of spend) are:
Inclusive of non recoverable VAT at current prices (£ million)
Figures for 2007/08 are due to be published in September 2009.
Q.13. In the MOD's response to the Committee's Report on Recruiting and retaining Armed forces personnel, the MOD said that Financial Retention Initiatives were short-term measures which gave the MOD time to address the underlying non-remunerative issues. What are those underlying non-remunerative issues and how is the MOD addressing them? The challenges facing the Services in recruiting and retaining Armed Forces personnel cut across all aspects of military life and they are kept under constant review. The single Services share experiences and there is considerable cross pollination of ideas and the overall "offer" to the Armed Forces, both financial and non-financial, is reviewed and adjusted in response to experience and changing circumstances.
The MOD's approach to securing sufficient, capable and motivated Service personnel is set out in the Service Personnel Plan. This encompasses a broad range of projects and links into the many personnel initiatives that were articulated in the MOD's responses to the Committee. These affect all aspects of military life from initial recruitment, reducing wastage during New Entry training, improving terms and conditions of service, providing better support to families, improving single and families accommodation, through to caring for our injured personnel and Veterans. The "Nation's Commitment: Cross-Government Support to our Armed Forces, their Families and Veterans (Cm 7424)", published in July 2008, also articulates a wide range of new measures that will complement existing provisions and both remove disadvantages imposed by service life on our people and their families and address the circumstances where service justifies special treatment.
Q.14. In the MOD's response to the Committee's Report on Recruiting and retaining Armed forces personnel the MOD said that Operational and Manning pinchpoints were "reported against subjective criteria which since 2003 have become progressively more rigorous." What are those subjective criteria and how have they become more rigorous? A Pinch Point trade becomes apparent when there is a shortfall, or an anticipation of a shortfall, in qualified manpower. A shortfall is caused either by too many people choosing to leave (Voluntary Outflow) or insufficient numbers coming through the training process (Gains to Trained Strength). It is the interpretation of the effect that the shortfall will cause that determines whether it is included on the register or not. The decision to include a trade on the Pinch Point register is based on consideration of the operational situation, manpower planning, the economic situation, trends, national demographics and equipment enhancements. The process through which these criteria are applied, primarily through single-Service and Joint Pinch Point Working Groups, has become more rigorous as the definition of Pinch Points has become more precise. For example, the 'Infantry' Pinch Point has now been refined to 'Infantry: Private-Lance Corporal', a smaller and more distinct cohort. It is only these two ranks that needed to be targeted as a Pinch Point with specific plans and resources to alleviate the pressure. Greater clarity has allowed these resources to be targeted to better effect.
Q.15. Whether the MOD expects the number of pinchpoint trades to increase or decrease over 2008-09 period? It is clearly our intention that current measures will have a positive effect on key Pinch Points, some of which we would hope to remove from the register as a result.
Q.16. Have the major changes to the structure of the infantry had any impact on recruitment and retention? The introduction of the Future Infantry Structure (FIS) was primarily intended to create a more coherent force structure. It was also intended to offer soldiers greater choice over where they serve and in what role (for example, a typical regiment will now contain battalions with different specialisms, such as Armoured or Light Role, and offer a variety of geographical choices). FIS aimed to create units that are better manned to deliver operational requirements, and in part to reduce the pressure on personnel. The implementation of FIS has recently been successfully completed (some changes were only implemented in late 2006/7). There are likely to be a small number of cases in which the implementation of FIS has been a factor in an individual's career planning and choices; however, the changes have not been raised as a factor on welfare and attitude surveys for either serving soldiers or potential recruits.
Q.17. To what extent will the temporary structural changes made in the Army alleviate the stretch on personnel as a result of the current operational tempo? Temporary changes to the Army's force structure in order to sustain current operations fall into four broad categories: · Creation of new temporary
structures to respond to the particular needs of operations in · Using units in roles for which they are not formally attributed (known as reroling) to increase the number of units able to provide the capabilities most needed on operations. Examples include reroling Royal Engineer General Support Squadrons to provide Close Support, and reroling AS90 Batterys to operate the 105mm Light Gun. · Reroling of capability not currently required on operations to crew Urgent Operational Requirement (UOR) equipment. This provides the Army with the flexibility to force generate without adding unduly to the operational demand and ensures that newly procured equipment is deployed on operations as soon as reasonably possible. Examples include reroling High Velocity Missile (HVM) Air Defence Missile Batterys to operate the Medium Unmanned Air Vehicle UOR. · Using Force Elements in their secondary role as Infantry, which has seen both Royal Artillery and RLC Pioneer Corps sub-units used in the Infantry role in Iraq. These structural changes are focused primarily on sustaining current operations and have been made with the principle of reversibility in mind. In addition, the measures described above have eased some of the pressure on personnel in areas such as the infantry and a number of the key pinch points by increasing the Army's capacity to generate the capabilities required for operations. While the requirements of our current commitments mean that there remain several areas where harmony guidelines are not being met, reroling contributes to managing this impact while also providing those capabilities most in need on the front line.
Q.18. What has the new Conflict Prevention Pool achieved to date? The new Conflict Prevention Pool (CPP) is on course to deliver against its annual goals across its eight strategies. It is currently only half-way through its inaugural year and its first annual report will provide full details of achievements over 2008-09. Two examples of progress to date are:
· The Africa
Programme continues to support building the capacity of the African Union (AU).
The AU has recently shown greater political will to become involved in
mediation - for example with the Government of Sudan on both § The work under the CPP programme in Moldova, in particular the 'Transnistrian Dialogues', continues to provide the only confidence building measures that are working between the Moldovan and the Transnistrian sides, and it has received endorsement from the EU Special Representative.
Q.19. Has cooperation continued between the The
Q.20. What evaluation have the MOD made of the
impact of the Stabilisation Aid Fund, and Conflict Prevention Pool money before
this, in Evaluation of the impact of the
Stabilisation Aid Fund (SAF) is undertaken tri-departmentally with FCO and DFID
(as was the evaluation of the impact of the Conflict Prevention Pool before
it). The recent tri-departmental SAF review reported progress as being on track
in
Q.21. In what way did progress in the Balkans, Congo, Nepal, and Nigeria fall short of expectations, and why was information on this not included in the Annual Report? Information was provided at Annex C of Volume II of the MOD Annual Report and Accounts.
Q.22. As part of the Streamlining initiative, the
Department will no longer need office space at the Old War Office and The
exit strategies for both
Q.23. What will be the impact of the implementation
of the International Financial Reporting Standards ( The implementation of International Financial Reporting Standards (IFRS)
is being undertaken in two tranches: Financial Instruments and Foreign Exchange
Accounting with effect from April 2008; and remaining IFRS changes as adopted
by HM Treasury with effect from April 2009.
The latter includes the requirement to produce shadow IFRS-based
accounts for 2008-09, by September 2009. Implementation is progressing well and
the
Financial Instruments and Foreign Exchange Accounting (2008-09) The only impact of the financial instrument standards is in respect of foreign currency accounting: · The foreign exchange forward buy programme is a derivative to be valued at fair value, creating a net financial asset (£260M) on the balance sheet as at 1 April 2008. Subsequent movement in the valuation is through the Operating Cost Statement. · Foreign currency transactions translated at the spot rate rather than the forward purchase contract rate. This will result in an increase or decrease in Capital DEL and Resource DEL expenditure related to the particular transaction if the spot rates vary from the forward purchase contract rate; offset centrally by the movement in the derivative.
International Financial Reporting Standards (2009-10) The key changes to the Department's resource accounts are: · Service Concession Arrangements (accounting for current Public Private Partnership (PPP)/Private Finance Initiative (PFI) arrangements). Arrangements are assessed under International Financial Reporting Interpretation Committee (IFRIC) note 12. Initial assessments indicate that the majority of the current off-balance sheet PFIs will become on-balance sheet resulting in a significant increase in Departmental assets. · Employee Benefits. The Department will be required to accrue for benefits earned but not taken e.g. untaken leave at the balance sheet date. This is likely to result in a significant balance sheet liability for the Department. · Lease-type arrangements. The Department needs to identify any lease type arrangements arising from the use of specific assets over which the Department can demonstrate control. Arrangements meeting the criteria of IFRIC may be accounted for as finance lease, resulting in an increase in Departmental assets.
Despite the good progress achieved to date, the full impact of changes have yet to be fully assessed and agreed with HMT and the NAO. Consequently, MOD cannot at this stage provide a view on the likely values. However, it is inevitable that changes to foreign exchange accounting and service concession arrangements will result in changes to the 2009-10 accounts.
RESPONSES TO COMMITTEE LETTER OF 18 NOVEMBER - EVIDENCE FROM THE SECRETARY OF STATE FOR DEFENCE (12 Nov 2008)
Q.24. Figures quantifying the MOD's achievements against its PSA targets. [Qq 141-142] The terminology "partly met" was mandated by the Treasury. It was designed to ensure consistency of reporting across departments. Four PSA targets were recorded as "partly met" in the summary section of the Annual Report and Accounts. In all cases we provided further detail designed to allow a clearer view about the actual achievement in the body of the report:
PSA target 2 - page 15, and Annex C (See also Q21 above) This records that of the 12 sub-targets, two were met, nine partly met and one not met. The nature of the sub-targets, as indicated by the Secretary of State in his evidence, were qualitative assessments made about regional stability issues, many of which were outside the control of the MOD.
PSA target 4 - pages 20 and 65. The targets were about qualitative assessments
of the value of
PSA target 5 - page 21 and paragraphs 276 et seq. This records that five of twenty two sub-targets were met. In arithmetic terms this suggests a 23% achievement rate, but this is not a particularly helpful way of viewing achievement in such a complicated sub target set.
PSA target 6 - page 24 and paragraph 226 et seq. This records that one of three sub-targets were met and suggests a 33% success rate.
It is difficult to see how we could assign a meaningful quantitative indicators to any of these targets. To do so we should have to give a weighting to each of the individual objectives and, ideally, include an assessment of the level of achievement for those objectives that were not met. Such judgements are likely to be subjective and will not replace the written assessment in allowing a reader to get a feel for what has been achieved in pursuit of the target.
Q.25. A full breakdown of the on-going costs attributed to JPA. [Q 148] As reported in the Service Personnel and Veterans Agency's (SPVA) Annual Report and Accounts the contractual cost paid to Electronic Data Systems (EDS) in FY 2007/08 was £68.9m. The cost for delivering the JPA service was £55.5m. This can be broken down as follows:
The release of any other financial information (cost or estimate) relating to the SPVA Interim Contract is inappropriate at this time because the bids for the next contract are currently being evaluated, and as such, this information is commercially sensitive.
Q.26. The MOD's assessment of the risks which may arise from reducing the numbers of Defence Intelligence Staff The DIS has some 4500 personnel, nearly 90% of whom are located outside of the MOD Head Office. The remaining 600 DIS staff form part of the MOD Head Office and will be reduced by 122. A further 70 will be relocated to Feltham; the majority of the reductions will be in business and functional support areas, and the reduction in analytical staff (some 50 posts) will be less that half of the total reductions.
Planned moves of staff from the Q.27. Details of where the MOD's headcount efficiency targets have been achieved-for both civilian staff and military administration and support posts. A breakdown of civilian manpower reductions between April 2004 and April 2008 (the period covered for the purpose of the SR04 efficiency targets) by budgetary area is given below. Please note that due to rounding, the individual figures do not add up to the total and comparisons between 2004 and 2008 are distorted in some cases by transfers of responsibility between TLBs. These reductions have been enabled by the Department's continuing efficiency and change programmes, such as the Defence Logistics Transformation Programme, the People Programme, Joint Personnel Administration and TLB collocations and mergers.
Civilian Manpower Reductions Land (including AG and NI) -3100 Chief of Joint Operations -110 Central and Defence Estates (a) +770 Science, Innovation and Technology +200 Defence Equipment and Support -6720 Air Command -3000 Fleet -1340 Unallocated (b) +230 Royal Fleet Auxiliary -40 DSTL + 210 Met Office -120 Hydrographic Office + 90 Defence Support Group -2390 Non Operational Locally Employed Civilians -3260 NET TOTAL REDUCTION -18620 a. Defence Estates was part of the b. staff who cannot be allocated to a particular TLB
A breakdown of the reduction in military and admin support posts by enabling initiative is as follows:
Military and Admin Support Posts Closure of RAF Coltishall -738 Merger of Royal Navy TLBs -121 Merger of RAF TLBs -229 Joint Personnel Administration -588 Defence Logistics Transformation Programme -3418 Closure of Fleet delivery training -246 TOTAL REDUCTION -5487
4 December 2008
|