House of Commons - Defence Equipment 2009

Defence Equipment 2009 - Defence Committee Contents

2 DE&S progress and performance

4. An overview of DE&S in provided in Table 2 below. DE&S is a Top Level Budget (TLB) area of the MoD. The mission of DE&S is "To equip and support our Armed Forces for operations now and in the future".[8]

Table 2: Overview of DE&S

Defence Equipment and Support (DE&S) equips and supports the UK's armed forces for current and future operations. Employing approximately 25,500 people, with a budget of £13 billion, its Headquarters is located in Bristol with other sites located across the UK and overseas.

DE&S acquires and supports through-life, equipment and services ranging from ships, aircraft, vehicles and weapons, to information systems and satellite communications. As well as sustaining ongoing requirements including food, clothing, medical supplies and temporary accommodation, DE&S is also responsible for HM Naval Bases, the joint supply chain and British Forces Post Office (BFPO).

DE&S works closely with industry through partnering agreements and private finance initiatives in accordance with the Defence Industrial Strategy (DIS) to seek and deliver effective solutions for defence.

Source: Ministry of Defence[9]

Inquiries undertaken by the Committee into DE&S

5. We have undertaken regular inquiries into defence equipment procurement. In our Report Defence Procurement 2006 published on 8 December 2006, we examined the performance of the DPA against its Key Targets and how the merger of the DPA and the DLO was progressing.[10] In our Report Defence Equipment 2008 published on 27 March 2008, we examined the progress of DE&S in its first year of operation.[11] The specific issues examined in this report included: the progress in implementing the Defence Acquisition Change Programme; the progress in implementing the Through Life Capability Management (TLCM) approach; the progress in improving DE&S staff skills (particularly engineering, project management, logistics, finance and commercial skills); the plans to reduce DE&S staff to 20,000 by 2012 (on 1 April 2007 when the DPA and DLO merged, DE&S had some 27,500 staff); new approaches to contracting, such as contracting for availability; the efficiency and value for money improvements expected from the merger (the merger was expected to generate annual net cash-releasing savings of some £250 million by 2010-11 and further savings were expected in the future from the collocation of most of DE&S business in the Bath and Bristol area); and the measuring and reporting of performance. The Government response to our Defence Equipment 2008 Report was published on 17 June 2008.[12]

Overview of DE&S progress

6. The Ministry of Defence Annual Report and Accounts 2007-08, published on 21 July 2008, includes a review, DE&S: One year on. The review states that:

DE&S was established as a 'fit for purpose' organisation in April 2007, only nine months after the decision to merge was announced. Immediately after the merger, the DE&S Main Board began more detailed work to evolve the organisation from one that was 'fit for purpose' into one that was agile and effective, which led to the new 'Blueprint' for the organisation to be delivered by 2012 by the PACE (Performance, Agility, Confidence, Efficiency) Change Programme. Although it is still relatively early days, DE&S is settling down well as a key deliverable of acquisition change and as part of 'Team Defence'. It has created a strong focus on improving it ability to deliver its mission […] Although DE&S has achieved much since it stood up in April 2007, progress has inevitably been faster in some areas than others. Business change has been more straightforward where operational pressures are less intense, and where the management team was already well established at the time of merger.[13]

7. The progress of DE&S, some 18 months after the merger, was referred to in some of the written evidence we received. Table 3 provides examples from the written evidence we received about the progress of DE&S.

Table 3: Examples from the written evidence received about DE&S progress

Comments about DE&S progress

EADS UK "remarkable progress has been achieved merging the DPA and DLO organisations in the midst of difficult circumstances strategically and financially".[14]

Unite Amicus Section "Unite believes Defence Equipment and Support (DE&S) is not achieving the objectives for which it was created".[15]

VT Group "Structural changes take time to bed down; more importantly, it is necessary to build a new culture and set of behaviours to support the new structure…. VT is sensitive to the fact that any assessment of DE&S' performance must be set in the context of the MoD's current budgetary challenges and the pressure of supporting simultaneously deployed operations in Afghanistan and Iraq. DE&S is in effect running in parallel two very different procurement processes".[16]

Serco "We welcomed the formation of DE&S, and are greatly encouraged by early progress in improving relations between the MoD and industry and improvements to the procurement process which, ultimately, serve to strengthen support to operations".[17]

Defence Industries Council (DIC) "MoD deserves praise for the expeditious way the transformation was managed and executed. Although the process remains to be completed we recognise and support the efforts that have been made to embed Through Life Capability Management (TLCM) in the heart of the organisation's structures and processes. We believe the department is heading in the "right direction" even if many remain impatient for greater progress".[18]

8. While the evidence received has generally welcomed the progress made to date following the merger, some of the evidence commented on the impact of supporting current operations. The memorandum from the Defence Industries Council (DIC) states that:

However it is difficult to judge the overall success of the transformation in the current circumstances. DE&S has, quite rightly, focused considerable attention on support to operations and the overall impact of the MoD's current financial and programme difficulties have slowed the decision making processes in many areas and slowed progress in the introduction of newer, longer term, acquisition approaches based on the principles of TLCM. Companies may therefore find it difficult to divorce some systematic improvements from the impact of programme delays and may be more conscious of the disruptions caused as a result of reductions and changes amongst their regular contacts in project teams. When the current programme difficulties are resolved it should allow the newly transformed organisation to demonstrate its true capabilities.[19]

9. At our evidence session on 18 November 2008 with industry representatives, we asked about the progress made by DE&S since the merger. Mike Turner, Chairman of the Defence Industries Council, said that he thought that the "MoD should be congratulated on the speed with which they did that [bringing together of the DPA and the DLO] and brought it into effect".[20] Ian Godden, Chief Executive of the Society of British Aerospace Companies (SBAC) considered that:

In terms of a merger of interest, it takes 18 months typically in any corporate entity or any government entity to put the two things together and develop. I think it has made the right move; it has progressed, et cetera. I think, however, in the organisation the issue is not so much a big budget issue but the fact that the pressure on the organisation on the very things we have talked about earlier, which are UORs, the whole concept of developing and revising the equipment review and so on and the issues around government policy on skills and technology, has acutely distracted the organisation from getting on with that programme. I think it has done excellently; it has worked hard at it, but it could be accelerated with a bit of stability in terms of what is happening to the overall picture. That is my observation of it.[21]

Bob Keen, Head of Government Relations, BAE Systems, added that:

I would agree with all of that but I think it is worth saying that there is quite a lot of work going on to embed some of the through-life capability management principles into the way the new organisation does its business. There has been a good lead, from our perspective as a company, given by the capability area in MoD, the next stage of which is the establishment of a series of programme boards which will bring together the various stakeholders and interests in a particular capability area. I do not think we should ignore the work that has been going on, having established the organisation, to embed some of those principles into the way it operates. As Ian says, clearly that has been clouded by the general background against which they have been operating.[22]

10. DE&S was created on 1 April 2007 following the merger of the Defence Procurement Agency and Defence Logistics Organisation. Some 20 months after the merger, DE&S appears to have made good progress and is considered to be "heading in the right direction".[23] The progress made has been achieved against a backdrop of supporting current operations in Afghanistan and Iraq. We commend the Chief of Defence Materiel and DE&S staff for their achievements to date.

11. While industry has generally welcomed the progress made to date by DE&S, it has also called for this progress to be accelerated and considers that the establishment of programme boards will be particularly beneficial. In its response to our Report, we expect the MoD to set out its plans for accelerating the progress achieved to date, the key changes it expects to see implemented in 2009, its plans relating to the establishment of programme boards, including the benefits expected from such boards.

Performance in supporting current operations

12. The Ministry of Defence Annual Report and Accounts 2007-08 provides some statistics on the scale of the support being provided to current operations:

Between April and December 2007 we moved 45,000 tons of freight to Iraq and Afghanistan. In the same period the Defence Stores Distribution Agency made 300,000 issues in support of operations and 50,000 personnel were moved to theatre.[24]

13. We asked which specific issues about support to current operations were of most concern to CDM. He told us that:

Do the Forces in theatre and the Forces in contact have the right equipment? Is it the best equipment that we can give them? Is it properly integrated? Do they have the right amount of combat supplies, ammunition, food and so on? That is going well. I think the answer is: yes, they do. To answer your specific question: that is what I do worry about.[25]

I am happy—and this comes from the commanders in the field—that our Forces are the best equipped that they can be. I do not know if you saw Andy McNab over the weekend, if I can quote him, saying that the American infantry are looking to use the British infantry's equipment. That is an interesting comment.[26]

14. On the issue of the transport assets available to the MoD, CDM said that the Ro-Ro ferries were good and had worked well and that it was fairly easy to take up shipping from trade "to get the sea line of communication out to Karachi or out to Iraq". However, he considered that one of the highest risks was "strategic air",[27] and at the top of his wish list for supporting current operations would be "more strategic air".[28] We consider the issue of the airbridge below.

AIRBRIDGE

15. CDM emphasised at the evidence session on 25 November 2008 that the airbridge was "successful" with some 80% of aircraft leaving Brize Norton within four hours of the time they were planned to leave. However, he acknowledged that, while the airbridge was "workable", it was "fragile".[29] The new Minister for Defence Equipment and Support appeared to see the situation with the airbridge as more serious. He told us that "we do find ourselves in a difficult situation with the A400M […] and we do have a big problem, we do have a big gap in the airbridge".[30]

16. We examined strategic airlift and the issue of the airbridge in our Report Strategic Lift, published on 5 July 2007.[31] We had been concerned to learn that the A400M transport aircraft programme, which is to provide new strategic and tactical airlift for our Armed Forces, had been delayed by 15 months. As a `consequence of the delay the lives of ageing Hercules C-130K aircraft had to be extended.[32] Some of the written evidence we received for this inquiry referred to the delays on the A400M programme and are set out in Table 4 below.

Table 4: References to the delays on the A400M programme in the written evidence received

References to delays on the A400M programme

EADS UK "While there remain challenges in some programmes, on A400M it needs to be recognised that this aircraft is designed to meet a seriously demanding and much needed requirement for the RAF and European air forces. It will provide a unique and very flexible capability; but it is consequently a very complex machine. For example, this aircraft will incorporate state-of-the-art systems and structure in addition to using power plants designed from scratch specifically to deliver the performance capability demanded by the customers. It was also designed to be as US ITAR restriction free as possible and to create a sovereign ability in Britain and Europe to design create and support serious tactical/strategic lift for our military customers. It is clearly not a straightforward civil Airbus product, and accordingly cannot be approached in the same manner as simply procuring a civil aircraft. We and our suppliers are working intensively with our customers to resolve outstanding issues as well as to mitigate the impact of any delays. We are confident of agreeing a robust way forward".[33]

Royal Aeronautical Society "Our prediction that further slippage was likely was dismissed by industry spokesman as being too pessimistic. It gives the Society no pleasure to see that its misgivings have come to pass. The Society is concerned that a much-needed military capability, as well as potentially a valuable asset in world markets will be subject to further delay […] There is little utility in detailing the reasons for the problems with the A400M, save to provide some support for EADS-Airbus' claim that its commercial freedom to manage the programme has been compromised by the politics of collaboration. Airbus was employed to instill the kind of commercial discipline so often lacking in collaborative programmes. In accepting a fixed price contract, it was prepared to assume a large degree of risk. It now seems intolerable that Airbus must now pay the penalty for decisions forced upon it for national industry policy reasons and for the continued interference from several national procurement agencies […] If anything, the experience to date with the A400M has re-enforced negative perceptions of European collaboration and there is a danger that firms with other options, particularly in the US, may look for alternative partnerships that could undermine a European defence industrial community that has delivered benefits, particularly technological, for both Europe and the United Kingdom".[34]

17. In terms of the current assessment of the delay to the A400M programme, CDM said he was "working on an in-service date of at least two years' delay".[35] The Major Projects Report 2008, published on 18 December 2008, reported that the current forecast in-service date was December 2011, a forecast in-service date slippage of 24 months.[36] The Minister for Defence Equipment and Support told us that "we are sadly […] some way from an in-service date for the A400M".[37] An article in the Sunday Times on 11 January 2009 reported that the programme had experienced further delays and A400M aircraft "may not now be delivered until 2012 or later".[38]

18. CDM could not provide us with any more details about the likely in-service date as he was "waiting for the company to tell us what the new delivery schedule will be". We pressed CDM on when he expected the delivery schedule from the company. He said that:

I genuinely do not have a date, but I will be disappointed if it were more than a few months. Very disappointed […] there are a number of milestones (which I am not prepared to go into for commercial reasons) coming up, which I think will encourage the company to reach a view on the delivery schedule sooner rather than later.[39]

19. The key date for the MoD was getting the delivery schedule from the company,[40] in order to allow it to make the necessary decisions about other options to pursue.[41] CDM said that the MoD was already considering "what we will do when we know what the schedule is going to be. So, yes, we have to get our plans together to see what we will do if, as you say, the A400M slides off further to the right".[42] We asked about the options being considered. CDM outlined these as follows:

We have got a number of alternatives. We have got the [Hercules] C130Js which are fine; we have got the Ks which should be going out of service—we could extend them at a cost, that is one option; we could try to bring forward the A330s from the future strategic tanker aircraft—that is another option we are exploring; we could buy more C17s—that is another possibility. There are a number of options sitting on the table. There are also some commercial options as well—we could hire aircraft […]The key here is to find out what the schedule for delivery of the A400M is, and that is the challenge at the moment.[43]

The Minister for Defence Equipment and Support confirmed that these were the options that the MoD were looking at and that there might be "one or two others". He stressed that "the airbridge is an absolute critical imperative for us".[44]

20. It is extremely serious that the A400M transport aircraft programme, which is to provide much needed new tactical and strategic airlift for our Armed Forces, is now running two years late and further delays cannot be ruled out. We expect the MoD to press the contractor for a new delivery schedule for the programme and examine closely the assumptions and estimates in the schedule to ensure they are robust. Once the new delivery schedule is confirmed, the MoD needs to act swiftly to take the decisions which will prevent any capability gap emerging in the future relating to air transport. We expect the MoD, in its response to our Report, to provide us with an update on the forecast in-service date for the A400M programme and to update us on the action it is proposing to take once the new delivery schedule has been received from the contractor.

21. We consider that the Government has no choice but to consider the options referred to by the Chief of Defence Materiel. We call on the Government to set out its most up-to-date thinking on these options and to say whether it considers that there is a real risk that the entire A400M project might be so delayed that abandonment would be preferable. The costs and benefits attributable to any such decision should be clearly explained.

22. We sought confirmation that A400M aircraft will have a full Defensive Aids Suite (DAS) when they enter service. The Minister for Defence Equipment and Support confirmed that they would,[45] but added that DAS would only be fitted for "the ones that we are employing in theatre".[46] We pressed further on this matter and asked whether the MoD might be procuring some A400M aircraft without a full DAS on the basis that these aircraft would not be flying into dangerous areas. We were surprised to learn from the Minister that the MoD "need to take that decision nearer the time". He added that:

I have just given you the general principle and it is a very important general principle. In so far as we were clear that some A400Ms would not need to fly into theatre maybe we would not need to fit the defensive aid suites, but we would have to take a view as to whether it would be sensible to have some aircraft, maybe just for training purposes, where we did not need that. It is a decision we have not taken yet.[47]

23. On the issue of whether the A400M aircraft would be fitted with a fuel inertion system and with explosive suppressant foam, the Minister said that, as with DAS, "the same principles apply in all three cases because obviously the three cases are very analogous and the same issue arise".[48]

24. We asked whether the Chinook helicopters which had just been made available to go to Afghanistan would have a fuel inertion system. General Figgures explained that:

They have the pannier tanks, the piano hinges and they have got self-sealing tanks so the business of catastrophic failure through fire would appear not to be the same as on a large fixed-wing aircraft; there is a balance of risk there, but we constantly review where to strike that balance. If we felt as a result of this constant assessment that it was necessary to do it we would have to do it, although again we may not do it in quite the same way. Currently we believe we have reduced the risk sufficiently through the self-sealing tanks and the fact that they are on panniers outside. When you have an enforced landing the tanks fall off and so reduce the danger of a catastrophic fire.[49]

25. We asked General Figgures what made him think that the decision on the Chinook helicopters regarding a fuel inertion system was the right one. He said that it was:

Because I am certainly conscious of the requirement to review this and carry out the necessary risk assessments and carry out the necessary trials to see that we have reduced it to as low as reasonably practicable.[50]

26. The Minister for Defence Equipment and Support has assured us that all the A400M transport aircraft which will be deployed into theatre will be fitted with a full Defensive Aids Suite, a fuel inertion system and explosive suppressant foam. Given that risks to aircraft are not restricted to operational theatres, we consider it surprising that a decision has yet to be made on whether the A400M aircraft not earmarked to be used in operational theatres will be fitted with all three systems. The safeguarding of our Service personnel should be paramount and the equipment they operate should have the maximum protection available. We note that the MoD considers that the risk of catastrophic fire on Chinook helicopters with pannier fuel tanks is low. We look to the MoD to ensure that its assessment about such risks is robust and is re-examined on a regular basis.

URGENT OPERATIONAL REQUIREMENTS

27. Equipment needed for current operations is acquired through the Urgent Operational Requirement (UOR) process. We have examined the UOR process in a number of our inquiries. In our report UK land operations in Iraq 2007, published on 3 December 2007, we noted the MoD's assessment that the UOR process was working well in "rapidly delivering to the front line the battle-winning capability required by our Armed Forces".[51]

28. The written evidence received for this inquiry has generally praised the UOR process. The memorandum from the VT Group states that "There is a widespread consensus that the Urgent Operational Requirements (UOR) process is very effective in delivering quickly much needed equipment and support to the frontline".[52] At our evidence session with industry representatives, Mike Turner said that the MoD should be given "great credit on UORs. They have responded to what the lads need out in Iraq and Afghanistan in a magnificent way and so has industry".[53] At our evidence session with CDM and DE&S officials, we asked whether the UOR process was still operating effectively. CDM confirmed that it was "working successfully", although he acknowledged that improvements could always be made.[54] Dr Tyler, Chief Operating Officer, DE&S, provided further details regarding UORs:

This is practically our top focus in ensuring the delivering of UORs. Earlier this year we established a UOR programme office whose specific remit was to look across all of our areas of UOR activity, and make sure that we were continuously trying to improve delivery. Indeed, the numbers for this year so far have improved on last year's numbers. Last year we were delivering 67 per cent of our projects at their 50 per cent forecast; and 86 per cent at their 90 per cent; and this year we have improved—79 per cent of them being delivered at their 50 per cent forecast; and 89 per cent at their 90 per cent forecast, so we are on an improving trend. One of the things that is an increasing challenge for us is the technical complexity and scale of some of the UORs, the sophistication of them. Some of the pieces of equipment we are putting in under UORs previously would have been small core, programme projects in their own right; but of course what we are having to do is get them into theatre very, very quickly.[55]

29. We note that the Urgent Operational Requirement process has continued to prove highly effective in enabling vital equipment to be provided in quick time to our Armed Forces in Afghanistan and Iraq.

30. On 29 October 2008 the Secretary of State announced that further protected vehicles, some 700 new vehicles, are to be procured as Urgent Operational Requirements for operations in Afghanistan and Iraq. The Statement says that:

£500 million of funding has been allocated from the reserve towards this protected mobility package, which is expected to cost over £600 million in total. Defence will fund a part of the package in acknowledgement of the longer-term benefit to core Defence capability these vehicles offer beyond our current commitments.[56]

31. We welcome the announcement on 29 October 2008 that a substantial number of protected vehicles are to be procured as Urgent Operational Requirements. The protection of our Service Personnel against continuously evolving threats must be the top priority. In its response to our Report, we expect the MoD to provide us with an update on its progress in acquiring these new vehicles and a breakdown of the procurement costs, including details of how much is to be funded from the MoD's budget. We also expect the MoD to provide us with details of which of the vehicles are expected to provide "longer-term benefit" beyond the current operations in Afghanistan and Iraq.

COSTS AND FUNDING OF URGENT OPERATIONAL REQUIREMENTS

32. In our Report Ministry of Defence Annual Report and Accounts 2006-07, published on 28 January 2008, we set out the costs of UORs in the period 2002-03 to 2006-07. These costs are set out in Table 5 below and also include the costs for 2007-08.

Table 5: Spend on UORs in the last six years

Financial year Approval cost (£ million)

2002-03 500

2003-04 180

2004-05 130

2005-06 260

2006-07 790

2007-08 1,600[57]

Total 3,460

Source: Ministry of Defence[58]
March 2009
LONDON: THE STATIONERY OFFICE

33. The Ministry of Defence Annual Report and Accounts 2007-08 states that:

The Urgent Operational Requirement (UOR) process is continuing to deliver; rapidly acquiring and delivering theatre-specific, battle-winning capability required by our Armed Forces at the front line. From April 2007 to March 2008 over 220 UORs were approved to a value of £1.6bn, bringing the overall total of UOR approvals to some £3.5Bn since the beginning of operations.[59]

The MoD expects to spend £1,065 million on UORs in 2008-09 for the operations in Afghanistan and Iraq.[60]

34. The change in the funding of UORs was announced on 22 November 2007 by the Rt Hon Baroness Taylor of Bolton, at the time Minister for Defence Equipment and Support. She acknowledged that when UK Armed Forces were deployed on operations, they faced challenges that "could not have been anticipated in the initial planning" and in those situations it was necessary to procure equipment quickly, utilising the UOR process, to counter those challenges.[61] However, she said that:

much of the new equipment that we have developed because of problems in the theatre will be incorporated into mainstream planning. That is normal and right […] The new approach with the Treasury means that, in the three years of the Comprehensive Spending Review, the reserve will continue to pay all additional costs of operations up front and will pay outright for UORs up to a mutually agreed total. Beyond that, the MoD and the Treasury will split the cost 50:50, with the MoD having to repay its share two years later, by which time there could have been adjustments in the programme. The Treasury will give an extra £200 million in 2010-11 to ensure that the new arrangements are cost-neutral to defence.[62]

The Minister emphasised that the suggestion that the Treasury was "clawing back" more than the £2 billion already spent on UORs was not correct as the "only difference is the new arrangements for the future".[63]

35. In our inquiry into the Ministry of Defence Annual Report and Accounts 2006-07, we sought further details about the new arrangements for funding UORs.[64] In our Report Ministry of Defence Annual Report and Accounts 2006-07, we concluded that "The arrangements appear far from straightforward and we will be interested to see how they work out in practice when they are implemented. We look to the MoD to ensure that the new arrangements do not, in any way, undermine the success of the UOR process seen to date".[65]

36. In November 2007 new arrangements for the funding of Urgent Operational Requirements (UORs) were announced. These new arrangements mean that, once the cost of UORs in a year have exceeded an agreed total with the Treasury, the MoD will have to contribute to half of the costs exceeding the agreed total and repay this two years later to the Treasury. In its response to our Report we expect the MoD to provide us with details of how the new arrangements have operated in practice, including its estimate of how much of the spend on UORs in 2008-09 will be funded from the MoD budget. We also expect the MoD to set out which of its programmes or activities will need to be re-prioritised in order to fund the cost of the UORs in 2008-09 which fall to the MoD's core budget.

37. While we are satisfied with UOR process, we remain concerned that the extent of UORs represents at least a partial failure by the MoD to equip adequately its forces for expeditionary operations which were anticipated by the Strategic Defence Review a decade ago.

RECUPERATION OF EQUIPMENT

38. In our Report Defence Equipment 2008, we examined the issue of repairing, refurbishing, supporting and storing equipment returning from current operations. The relevant paragraphs from this Report are reproduced in Table 6 below.

Table 6: Recuperation of equipment—extracts from Defence Equipment 2008 Report

Recuperation of equipment

53. We examined support for operations in our UK land operations in Iraq 2007 report. One of the concerns raised in our report was:

that equipment returning from operational theatres—whether it was procured through the routine acquisition process or as UORs—will require substantial expenditure to repair, refurbish, support and store, and it appears that no provision has been made for this in the MoD's budget.

54. The Government Response to this report states that:

In order to maintain equipment capability and avoid degeneration, we may repair and overhaul military vehicles used on operations more often than would routinely have been planned for in through-life costing assumptions. But the precise impact of activity on current operations and the subsequent costs of recuperation to a balanced force are complex issues, which depend on a range of factors. We have therefore initiated a substantial study to provide a detailed assessment of these issues, including the costs relating to operational usage, which will help to inform future equipment and financial planning.

55. We asked whether the recuperation of equipment would be funded as a cost of operation or whether it came out of the core budget. Lieutenant General Applegate said that:

Some of that funding does come out of contingency funding in order to maintain it. I am less sanguine about the cost of recuperation…. in other words, at a time when we do not need that equipment on the operation, or the operation is closing down, or we are trying to reconstitute a reserve, is there sufficient money to prepare for a contingency task in five years' time? That is an issue which the department is looking at in this [Planning] round.

56. We note that the MoD has initiated a study to assess the impact of current operations on equipment, such as vehicles, and the subsequent costs of recuperation. We see the costs of recuperation as a cost of operation to be funded from the Reserve and not from the defence budget which is already under substantial pressure. In its response to our report, we expect the MoD to set out the terms of reference for this study and, once the study is completed, to provide us with a copy of it.

Source: Defence Committee[66]

39. The Government response to our recommendation regarding the study to assess the impact of current operations on equipment stated that:

Our examination on the impact of current operations on equipments is in an early stage. No terms of reference have been set. When the study has been completed, the results will be made available to the Committee.[67]

40. Given that the Government response was published on 17 June 2008, we asked CDM about the progress with the study. He said:

That work is in hand; it is in hand in the equipment capability area; we are looking at the costs; we are looking at the timescale; and it is not yet ready to report.[68]

Rear Admiral Paul Lambert, Capability Manager (Precision Attack) and Controller of the Navy added that:

We are still in the middle of looking at this. There will be a debate on the costs and where those costs fall. We are in no position yet to say precisely where we are… it is a continuous investigation on the equipments; how quickly they are being burnt up; and what the issues are on recuperation etc. It is a continuous process.[69]

41. We were concerned that the heavy usage of equipment on current operations would lead to equipment wearing out more quickly than planned and capability gaps arising as a result. However, to our surprise, Rear Admiral Lambert said that he had looked at this issue, and helicopters and aircraft were "not being burnt up any faster than we had predicted".[70]

42. We sought clarification as to whether the recuperation work would be funded from the Reserve as an additional cost of operation, or from the MoD's budget. We found the response from CDM of concern:

I do not think we have discussed that yet. I can see it being quite difficult to discuss. Until we know the costs—which we do not yet—it is quite difficult to have a discussion about who is going to pay for it. We are not there yet.[71]

43. We pressed CDM further on this matter. Unfortunately, we were still unclear about which budget would bear the cost:

The cost of repairing vehicles that are required to be repaired, replacing and buying UORs, the cost of those operations is covered by the contingency Reserve… What I thought we were talking about was, if one of these operations ceases and then everything comes out of theatre, if that were to happen, who then pays for the cost of doing whatever needs to be done to it? Bear in mind, a lot of it will have been brought up-to-date, brought up to the most recently required specification anyway, and that is paid for out of the contingency Reserve. We are talking about something which is a bit of an unknown here, and that is our difficulty[72] […] I thought your question was about when something stops everything comes out and is sitting there who pays for that to be recuperated? That is quite a difficult debate to have until we know how much has to be spent on doing what to it, and what the requirement is.[73]

44. We are concerned that the MoD appears to have made little progress with regard to its examination of the impact of current operations on equipment. While the MoD appears to have robust data on the cost of equipment procured through the Urgent Operational Requirement process, it does not have information on the cost of recuperating equipment returning from current operations nor on the impact of those costs on other areas of its budget. Such costs must be substantial given the length of time that UK Armed Forces have been involved in current operations in Afghanistan and Iraq. The MoD must identify accurately the costs to date of recuperating equipment and the likely future costs of recuperation. Without such information, there is a real risk that these costs will fall on the Defence Budget, which is already under pressure, rather than on the Reserve as they rightly should be.

45. On 17 December 2008 we announced that we were undertaking an inquiry into Readiness and recuperation for the contingent tasks of today. Issues which we plan to examine in this inquiry include the balance in priorities for recuperation between manpower, equipment, training and sustainability, and the likely costs of and timescale for the recuperation of the Armed Forces and how such recuperation will be funded.[74]

Equipment procurement performance

PROCUREMENT PERFORMANCE IN 2007-08

46. The MoD's 2004 Spending Review Public Service Agreement (PSA) targets ran from 1 April 2005 to 31 March 2008. PSA target 6 was "Deliver the equipment programme to cost and time". The Ministry of Defence Annual Report and Accounts 2007-08 provides the final assessment against the MoD's six PSA targets. PSA target 6 was assessed as "Partly Met"[75]. The Annual Report and Accounts states that:

The Department invested about £6.7Bn in military equipment for the Armed Forces over the year, but procurement performance declined, failing to meet our in-year Public Service Agreement sub-targets for cost and time, and only partly meeting the overall target.[76]

Details of the MoD performance against the three sub-targets underlying PSA target 6 are set out in Table 7 below.

Table 7: MoD's performance against PSA target 6

Sub-target Assessment

At least 97% of Key User Requirements, for all Category A to C Projects that have passed Main Gate Approval, to be achieved. 100% of Key User Requirements achieved (99% in 2006-07, 97% in 2005-06)

On average, less than 0.2% in-year variation of forecast costs for Design and Manufacture phase of projects over £20M. 0.7% average increase in costs measured against estimated cost at beginning of year (0.0% in 2006-07, 0.2% in 2005-06).

No more than 0.4 months in-year slippage of forecast In-Service Dates for projects over £20M. 3.9 months average slippage (0.5 months in 2006-07, 0.7 months in 2005-06)

Source: Ministry of Defence[77]

47. The Ministry of Defence Annual Report and Accounts 2007-08 provides further details about the sub-targets relating to in-year cost growth and in-year project slippage which were not met:

both average in-year cost growth of 0.7% (£225M) and average project slippage of 3.9 months (164 in total across all projects) exceeded the tolerances established. The Department has therefore only partly met this Public Service Agreement target, in year and across the 2004 Spending Review period… The cost target is very susceptible to growth on only a few programmes. The key drivers were the Nimrod MRA4 (2.9% growth, £102M) and Meteor (Beyond Visual Range Air-to-Air Missile) (9.5% growth, £111M) projects. Much of the time slippage reflected low probability but high impact risks emerging during the test and trial phases towards the end of the programmes when the opportunities to mitigate issues are minimal, with the most serious being Naval Satellite Communications Terminals (19 months), and Terrier (27 months). Other significant contributors were General Service Respirator (22 months), Precision Guided Bombs (18 months) and SOOTHSAYER (16 months).[78]

48. The Nimrod MRA4 programme is one on which we have reported regularly. In 2007-08 the programme experienced in-year cost growth of £102 million—the forecast cost increase against approved cost at Main Gate now totals £789 million. The programme also experienced a further 3 months in-service date slippage—the forecast in-service date is now 92 months later than the approved in-service date at Main Gate.[79] In spring 2008 "further potential cost increases were identified by BAE Systems on the procurement aspects of the Nimrod MRA4 programme". The MoD informed us that work was underway to "scope the extent of these increase and identify potential mitigation measures".[80] We are concerned to learn that, once again, the Nimrod MRA4 programme has experienced further cost growth and in-service date slippage. In its response to our Report, we expect the MoD to set out the findings from its examination of the extent of further cost increases, to provide us with the latest position on the current forecast in-service date, and to outline the "mitigation measures" it has identified and what it expects these to deliver. We have not been satisfied by the explanations for these delays given by the MoD to date, nor by the Department's assurances as to how performance would be improved. We will return to this matter in the future.

49. The National Audit Office's (NAO's) Major Projects Report 2008 was published on 18 December 2008.[81] This report analyses the "cost, time and performance data for the military equipment projects in the year ended 31 March 2008". The report covers the 20 largest projects where the main investment decision—Main Gate—has been taken by the MoD.[82] The NAO's examination found that "For the period of the Report, the forecast aggregate costs of the projects [Typhoon (formerly known as Eurofighter) was excluded from the analysis because the numbers are commercially sensitive] increased by £205 million and there was an additional 96 months aggregate slippage". The NAO found that the forecast cost increase was largely as a result of growth on the Beyond Visual Range Air-to-Air Missile (BVRAAM) and Nimrod MRA4 programmes. Nine of the 20 projects examined experienced in-service date slippage during 2007-08.[83]

50. In its first year of operation, DE&S failed to meet its Public Service Agreement target to "Deliver the equipment programme to cost and time". We note that the National Audit Office examined the procurement performance relating to the 20 largest projects and found that the aggregate forecast cost for these projects increased by £205 million and the aggregate in-service date slippage increased by eight years in 2007-08. We are concerned that DE&S has failed to control delays on equipment projects with almost half of the 20 largest projects experiencing in-service date slippage in 2007-08. We have not been satisfied with the explanations given by the MoD as to what it intends to do to rectify this decline in performance, and we will be returning to this matter in the near future.

PROCUREMENT PERFORMANCE IN 2008-09

51. The MoD's Defence Plan 2008-2012 reflects the outcome of the 2007 Comprehensive Spending Review and sets out the top level objectives which the MoD plans to deliver over 2008-2012. Departmental Strategic Objective (DSO) 3 is "Build for the Future". Performance Indicator (PI) 3.1 under DSO 3 is "Procuring and Supporting military equipment capability through life". There are three sub-objectives:

average percentage forecast achievement of Key User Requirements [target of 97% for 2008-09];

average in-year variation of forecast in-service date [target of 0.4 months for 2008-09];

average in-year variation of forecast costs for Design and Manufacture [target of less than 0.2% in 2008-09].[84]

52. The MoD's Public Service Agreement Performance Report Quarter 1 2008-09 was published at the end of October 2008 and sets out the MoD's performance against its DSOs for the period 1 April-30 June 2008. Only one of the three indicators under DSO 3, PI 3.1 is forecast as meeting the target. The MoD's assessment of performance against the three indicators was as follows:

"Forecast achievement of 100% of the Key User Requirements" [target—97%];
"Average in-year forecast ISD slippage of 0.5 months" [target—no more than 0.4 months]; and
"Average in-year forecast cost increase of 0.85%" [target—less than 0.2%].

The report states that "in the first quarter of this financial year a number of risks to Time and Cost have been identified and options to recover these are being investigated".[85]

53. The MoD's Autumn Performance Report 2008-09 was published in mid December 2008 and sets out the MoD's performance against its DSOs for the period 1 July-30 September 2008. Only one of the three indicators under DSO 3, PI 3.1 is forecast as meeting the target. The MoD's assessment of performance against the three indicators was as follows:

"Forecast achievement of 99% of the Key User Requirements" [target—97%];
"Average in-year forecast ISD slippage of 1.4 months" [target—no more than 0.4 months]; and
"Average in-year forecast cost increase of 0.3%" [target—less than 0.2%].

The report states that "in the second quarter of this financial year previously identified risks to Time and Cost have matured and are reflected in the deterioration of the reported performance".[86]

54. At our evidence session on 16 December 2008, we asked how the recent changes in the exchange rates had impacted on the cost of equipment programmes. The Minister for Defence Equipment and Support acknowledged that exchange rate fluctuations were an issue of concern. CDM outlined the MoD's approach to managing exchange rate risk:

We try to place contract where we can in sterling and then the contractor/industry bears the exchange rate challenge. Some of them are in euros and some of them are in dollars. You may have seen the second quarter report from the MoD for this year. There is a potential cost overrun/cost increase in projects and that is virtually all the exchange rate in this current year.[87]

CDM said that the cost increases in the current year due to the exchange rate was about £60 million.[88]

55. Financial Year 2008-09 saw the introduction of new Departmental Strategic Objectives (DSOs) which include a Performance Indicator under DSO 3 covering "Procuring and Supporting military equipment capability through life". The MoD's performance, six months into 2008-09, has been disappointing with average in-year forecast in-service date slippage and average in-year forecast cost increases both exceeding the targets set. The MoD considers that exchange rate changes account for most of the forecast cost increases reported in 2008-09. In its response to our Report, we expect the MoD to set out its estimate of how much it anticipates exchange rate changes will add to the cost of equipment programmes in 2008-09 and what action it is taking to minimise the risk of such cost increases.

56. The DE&S Business Strategy 2008-12 states that DE&S "will play an active role […] using new acquisition approaches to reduce Demonstration and Manufacture timescales of projects by 50% from 2009 onwards". [89] In its response to our Report, we expect the MoD to set out what specific action it is taking to reduce the Demonstration and Manufacture timescales of equipment projects by 50% from 2009 onwards, a target set out in the DE&S Business Strategy 2008-12 and how such reductions will be measured and reported.

FACTORS BEHIND THE DECLINE IN PROCUREMENT PERFORMANCE

57. We sought to identify the main factors behind the decline in procurement performance. The MoD acknowledges that supporting operations has had an impact—"one corollary of the focus on meeting the challenge of supporting current operations has been a downturn in our performance in managing the acquisition of new capability".[90] However, the MoD could not quantify the impact of supporting operations on procurement performance:

Supporting operations, not least through the procurement of equipment to meet Urgent Operational Requirements, has been the Department's highest priority. Resources within DE&S have been prioritised accordingly. It is not, however, possible to assess to what extent, if any, this effort has impacted on our performance against the procurement targets.[91]

58. Dr Tyler told us that there was "something of the order of 700-750 of our staff engaged in the UOR activity, and we are making sure that across our organisation we are balancing our resources across the whole of our current projects and support to ensure that the UORs are getting the priority".[92] Sir Bill Jeffrey, MoD's Permanent Secretary, did not consider that supporting operations was a major factor behind the decline in procurement performance:

I would not overstate the knock-on impact on the rest of the business. There undoubtedly is some because certainly, when I visit Abbey Wood, I hear the same accounts of significant staff effort being devoted to the UOR process, but I do not think it is more in the end than a relatively small proportion of the total staff effort, so I would not jump to the conclusion that our longer-term investments are at risk because of this.[93]

The MoD does not consider it possible to assess how, if at all, support to current operations has impacted on performance against its procurement targets. We consider that, while it would appear that only a small proportion of DE&S staff have been involved on Urgent Operational Requirement projects, support to current operations has had an adverse impact on its procurement performance, although we doubt that this factor alone is responsible for the state of parts of the equipment programme. DE&S staff involved in UOR projects have had to be transferred from longer-term equipment projects and, given the importance of UOR projects, more experienced project staff are likely to have been transferred. We would hope that as work supporting current operations begins to reduce, and staff are transferred back to the longer-term projects, that this will have a positive impact on procurement performance.

59. The MoD's memorandum to our inquiry sets out the key factors which the MoD considers contributed to the decline in procurement performance:

The key factors for cost and time variation in Financial Year 2007-08 can broadly be grouped into three categories:

(i) decisions taken by the Department in the broader context of the defence needs (this would largely include elements of changed requirement; changed budgetary priorities; procurement strategy);

(ii) factors outside the Department's direct control (this would largely include international contracting process and procurement strategy issues, accounting adjustments and re-definitions; inflation and exchange rates); and

(iii) factors reflecting the realisation of unplanned or low level/high impact risk for the Department and/or Industry (technical factors).

The MoD considers that "much of the in-year cost variation falls to factors either outside the Department's direct control, with international factors being the single most significant element, or the realisation of unplanned low level / high impact risk".[94]

60. We sought further details on the programmes where there had been unplanned low level / high impact risk. The MoD considers that "low probability but high impact risks are more likely to occur during the testing and evaluation phase of a project". The MoD's approach to reduce both time and cost risk is "greater emphasis […] being placed on investment prior to Main Gate decisions, the aim being to ensure greater technical, financial and commercial maturity of solutions".[95] In its memorandum, EDS (an HP company) referred to "a reluctance to spend the recommended 10-15% of the project budget during the assessment phase".[96] We looked at the data in the Major Projects Report 2003 and the Major Projects Report 2008 to see whether there was any indication that the amount spent on the Assessment Phase of a project had increased. We found that, in general, it would appear that the amount spent on the Assessment Phase had increased substantially.

61. We note that the MoD considers that a key contributor to cost increases or delays on equipment projects is "the realisation of unplanned or low level / high impact risk". The MoD states that it was placing greater emphasis on investment prior to Main Gate to address this risk. In its response to our Report, we expect the MoD to set out, for the current projects which have passed Main Gate, the proportion of such projects where 10-15 per cent or more of the forecast project budget was spent in the Assessment Phase.

PACE PROGRAMME

62. The Ministry of Defence Annual Report and Accounts 2007-08 provides the following information about the DE&S PACE programme:

As called for in the Acquisition Change Programme, during 2007 DE&S conducted a post-launch business-led review to optimise the way the Armed Forces are equipped and supported. This led to the Blueprint: Future Operating Model in January 2008 setting out what DE&S should look like as a business and employer. This is now being implemented through the Performance, Agility, Confidence and Efficiency (PACE) programme, launched in March 2008. PACE will take DE&S beyond 'fit for purpose' to an operating model delivering 'best for Defence' outcomes contributing to an affordable and balanced Equipment and Support Plan with a significant reduction in acquisition cycle times and to greater agility in meeting the front line's needs.[97]

On its establishment, DE&S comprised approximately 27,000 staff (of whom around 6,600 were military) based at sites across the United Kingdom and overseas. Its headquarters is at the Abbey Wood site near Bristol but its personnel are widely deployed across the Defence Estate and in industry providing support to the Armed Forces. Over the year however staff numbers were reduced to approximately 24,500 and a number of Integrated Project Teams were relocated to Abbey Wood under collocation plans already in train. The intention is that, where there is no business need for them to be based elsewhere, DE&S staff will to the maximum extent possible be consolidated within the Bristol acquisition hub in order to improve effectiveness and efficiency and provide a broader range of career opportunities. By 2012 it is planned that about 50% of the staff working for DE&S will be based at Abbey Wood out of a total workforce of around 20,000. This is being taken forward as part of the PACE programme.[98]

63. We examined issues relating to DE&S staff skills, and the shape and size of DE&S, in our Defence Equipment Report 2008.[99] At our evidence session on 4 November 2008 for our Ministry of Defence Annual Report and Accounts 2007-08 inquiry, Sir Bill Jeffrey provided the following overview of the progress being made by DE&S in these areas:

In the so-called 'Pace' programme that Kevin O'Donoghue has put in hand, there are changes again associated with necessary reductions in manpower which will allow staff to be used more flexibly. Now, that is part of it. The other part, and this will take longer, but I think is heading in the right direction, is really what we were discussing earlier around the building of skills. Again, Sir Kevin can give you more detail than, I imagine, we can cover this morning, but, in terms of identifying groups of jobs where we expect particular levels of qualifications, the licensing of project managers, the building of commercial skills, it is inevitably something which will take time, but I think we are making progress.[100]

64. The MoD's memorandum provides details of the progress made to upskill DE&S staff, although the memorandum acknowledges that DE&S "must continue to develop and acquire skills needed for the future". Skills Directors have been appointed for a range of disciplines and have drawn up skills plans to improve the skills capability in each of the functions. The memorandum states that the "Skills Directors […] are on track to meet Professional Posts targets to ensure key designated posts are filled by suitably qualified individuals". We had been concerned that DE&S staff did not have sufficient time to complete their required training. However, 70% of DE&S staff met the "6+4" training days target in 2007-08 and the level of achievement in 2008-09 was considered to be at a higher level.[101] The progress relating to the upskilling for the key acquisition disciplines is set out in Table 8 below.

Table 8: Upskilling across the key acquisition disciplines

Acquisition discipline Achievements

Project and Programme Management   Project Management Level 3 Licence development commenced with a pilot of the Certificated Project Manager (CPM) qualification; 25 Professional Post holders are undertaking the pilot which will complete in March 2009. A total of 484 Project Management Licences (which are linked to the Association of Project Management) have been issued, including 80 at Level 2.

Finance
Over 55% of staff in DE&S finance professional posts are qualified accountants. To improve the future position, the Training Accountant Development Scheme (TADS) has been increased and 22 new graduates commenced the development programme in September 2008. Existing TADS achieved 100% pass rate in the May 2008 CIMA exams, with two TADS achieving a mark that brought them into the "top 10 worldwide". A further 39 have been accepted for Association of Accounting Technician training.

Commercial   Over 70% of DE&S commercial professional posts are filled by individuals with the relevant Chartered Institute of Purchasing and Supply (CIPS) qualification. The target of 100% of Commercial Directors with MCIPS or on the Professional Development Programme is currently at 75%. The target of 100% is expected to be reached by 31 March 2009. The B2 conversion 2007/08 intake graduated in September 2008.

Logistics   New Defence Academy learning courses have gone live. Inventory Management Licences have been launched with 500 passes to date. Ten Supply Chain Management courses are being delivered.

Engineering   Twenty one DESG Graduates commenced the development programme and a further 51 have been given an offer of contract. Delivery of places achieved on Land Systems Post Graduate Certificate. Delivery of modular Aerospace Engineering Technology & Systems Engineering awareness courses. Increase to apprentice recruitment, September 2008 intake expected to be in excess of 40.

Source: Ministry of Defence[102]

65. The Secretary of State referred to DE&S skills during our evidence session on 12 November 2008 for our inquiry into the Ministry of Defence Annual Report and Accounts 2007-08. He said that the "new commercial director in the department has brought a wealth of private sector expertise and experience into play".[103] At our evidence session with industry representatives we asked about the issue of DE&S staff skills. Mike Turner told us that:

Amyas Morse has done an excellent job coming in as Commercial Director of MoD with the training programmes and bringing more commercial people in.[104]

Ian Godden added:

I see it every day, secondments out to industry, secondments the other way, plus Amyas and his programmes, and that has had a big effect and will for the future.[105]

66. We note that DE&S has made good progress in improving the skills of its staff across a range of key acquisition disciplines. We note also that the Defence Commercial Director has recently been announced as the new Comptroller and Auditor General, but we consider it essential that the MoD build upon the progress he and the Chief of Defence Materiel have achieved to date.

67. At the evidence session with industry representatives, Ian Godden referred to a training programme on the "value of time":

The value of time is something that I know that Amyas Morse and the current MoD team are very keen to establish a programme on and to develop that timeliness in terms of decision-making, in terms of the risk/reward, getting to the risk/reward boundary as quickly as possible and agreeing that. I think those are programmes that would help, in addition to what Mike Turner has said.[106]

68. Equipment programmes have often experienced delays at various points in their life cycle. We note that the MoD is looking at training programmes which focus on the "value of time". In its response to our Report, we expect the MoD to set out what consideration it has given to such programmes and its future plans in this area.

STREAMLINING OF DE&S

69. We examined the plans for reducing the number of DE&S staff to 20,000 by 2012 in our Report Defence Equipment 2008.[107] In the Report we said that we remained to be convinced that improved economy, agility or responsiveness would follow from the planned reduction.[108] At the end of September 2008, DE&S employed some 23,400 staff.[109] This is a reduction of some 4,100 staff (15%) compared with the number in post when DE&S was formed on 1 April 2007. DE&S expects the number of staff to be some 23,300 at the end of March 2009. The memorandum from the MoD states that:

DE&S is currently reviewing its manpower requirements as part of the PR09 process. Based on current PACE (Performance, Agility, Confidence, Efficiency) manpower requirements, it is planned to reduce to a figure of around 20,000 by 31 March 2012 with resources re-prioritised where necessary to enable the effective delivery of our outputs.[110]

70. At our evidence session with industry representatives we asked about the streamlining plans. Ian Godden considered that:

My feeling is that it is right… On occasions it will conflict obviously, as any cost reduction exercise or any productivity improvement exercise would, at the same time as re-organising, and at the same time as fighting two wars. There is a lot of pressure on but I do not see the evidence that says that the cuts themselves are getting in the way of the programmes. I think those two are such that they can be combined.[111]

However, he added that:

All I know is that the uncertainty it creates is more the issue than the actual resources. I think the uncertainty of any reduction programme lives on and lives in the minds of people more than the actual resource issue itself…[112]

71. By 2012, DE&S plans to have reduced its staff by 25% compared to the number in post at the start of April 2007. At the end of September 2008 the number of staff had been reduced by some 15%. Given that procurement performance declined in 2007-08 and that DE&S is supporting two operations, we find it surprising that DE&S is pushing ahead with its streamlining programme. DE&S must monitor closely the morale of its staff and recognise the uncertainty that such programmes create. In its response to our Report, we expect the MoD to provide us with its rationale for reducing staff at a time when procurement performance has declined and when DE&S remains busy supporting two overseas operations. We also expect the MoD to provide us with details of the costs incurred to date, including redundancy and early retirement costs, as a result of the streamlining programme. The response should also set out how many consultants have been employed to undertake work previously undertaken by DE&S staff who have left under the streamlining programme, and the costs of these consultants.

REVIEW OF DEFENCE ACQUISITION

72. At our evidence session on 12 November 2008 for our inquiry into the Ministry of Defence Annual Report and Accounts 2007-08, the Secretary of State told us that "we have to deliver more equipment on time, we have to deliver more equipment on budget".[113] In his Statement to the House on 11 December 2008, the Secretary of State announced that:

I have also instituted a review, to be led by Bernard Gray, to examine progress with implementing the MoD's acquisition change programme and make any further recommendations to secure better value for money in the delivery of major acquisition programmes.[114]

73. We note that the Secretary of State has instituted a review to examine the progress in implementing acquisition reform and make recommendations for securing better value for money in the acquisition of major equipment programmes. There have been several such reviews over the last decade, yet major equipment programmes continue to experience cost increases and delays. It will be vital that the recommendations are implemented quickly and fully so that the expected benefits are delivered. We expect the MoD to provide us with a copy of the review once completed and to set out how the findings and recommendations in the review are to be taken forward.

8 DE&S Business Strategy 2008-12, paras 1.1-1.2 Back

9 http://www.mod.uk/DefenceInternet/MicroSite/DES/ Back

10 Defence Committee, First Report of Session 2006-07, Defence Procurement 2006, HC 56 Back

11 Defence Committee, Tenth Report of Session 2007-08, Defence Equipment 2008, HC 295 Back

12 Defence Committee, Seventh Special Report of Session 2007-08, Defence Equipment 2008; Government response to the Committee's Tenth Report of Session 2007-08, HC 555 Back

13 Ministry of Defence, Annual Report and Accounts 2007-2008 Volume I: Annual Performance Report, HC 850-I, p144 Back

14 Ev 66, para 1 Back

15 Ev 67 Back

16 Ev 70, para 3 Back

17 Ev 74 Back

18 Ev 75, para 1 Back

19 Ev 75, para 2 Back