2 DE&S progress and performance
Overview of DE&S
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 happyand this comes from the commanders
in the fieldthat 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 servicewe could extend them at a
cost, that is one option; we could try to bring forward the A330s
from the future strategic tanker aircraftthat is another
option we are exploring; we could buy more C17sthat is
another possibility. There are a number of options sitting on
the table. There are also some commercial options as wellwe
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 improved79
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 equipmentextracts 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 theatreswhether it was procured through the routine acquisition process or as UORswill 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 costswhich
we do not yetit 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 millionthe forecast cost
increase against approved cost at Main Gate now totals £789
million. The programme also experienced a further 3 months in-service
date slippagethe 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 decisionMain Gatehas 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" [target97%];
- "Average in-year forecast ISD slippage of
0.5 months" [targetno more than 0.4 months]; and
- "Average in-year forecast cost increase
of 0.85%" [targetless 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" [target97%];
- "Average in-year forecast ISD slippage of
1.4 months" [targetno more than 0.4 months]; and
- "Average in-year forecast cost increase
of 0.3%" [targetless 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
20
Q 33 Back
21
Q 34 Back
22
Q 35 Back
23
Ev 75, para 1 Back
24
Ministry of Defence, Annual Report and Accounts 2007-2008 Volume
I: Annual Performance Report, HC 850-I, p 145 Back
25
Q 129 Back
26
Q 130 Back
27
Q 134 Back
28
Q 130 Back
29
Q 132 Back
30
Q 391 Back
31
Defence Committee, Eleventh Report of Session 2006-07, Strategic
Lift, HC 462 Back
32
ibid, para 77 Back
33
Ev 66, para 2 Back
34
Ev 72, paras 11-13 Back
35
Q 259 Back
36
National Audit Office, Ministry of Defence Major Projects Report
2008 Project Summary Sheets, HC 64-II Session 2008-2009, p
6 Back
37
Q 384 Back
38
"RAF transport aircraft delay" The Sunday Times,
11 January 2009, Back
39
Qq 268-269 Back
40
Airbus Military Sociedad Limitada Back
41
Qq 266-267 Back
42
Q 264 Back
43
Q 133 Back
44
Q 391 Back
45
Q 382 Back
46
Q 383 Back
47
Q 384 Back
48
Q 387 Back
49
Q 388 Back
50
Q 390 Back
51
Defence Committee, First Report of Session 2007-08, UK land
operations in Iraq, HC 110, para 72 Back
52
Ev 70, para 3 Back
53
Q 62 Back
54
Q 135 Back
55
Q 135 Back
56
HC Deb, 29 October 2008, Cols 28-30WS Back
57
Ministry of Defence, Annual Report and Accounts 2007-2008 Volume
I: Annual Performance Report, HC 850-I, p 30 Back
58
HL Deb, 14 December 2007, Col WA85 Back
59
Ministry of Defence, Annual Report and Accounts 2007-2008 Volume
I: Annual Performance Report, HC 850-I, p 30 Back
60
Defence Committee, First Report of Session 2008-09, Winter
Supplementary Estimates 2008-09, HC 52, p 3 Back
61
HL Deb, 22 November 2007, Col 996 Back
62
HL Deb, 22 November 2007, Col 997 Back
63
HL Deb, 22 November 2007, Col 997 Back
64
Defence Committee, Fifth Report of Session 2007-08, Ministry of
Defence Annual report and Accounts 2006-07, HC 61, paras 150-154 Back
65
ibid, paras 155 Back
66
Defence Committee, Tenth Report of Session 2007-08, Defence
Equipment 2008, HC 295, paras 53-56 Back
67
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, para 10 Back
68
Q 110 Back
69
Qq 110-111 Back
70
Q 112 Back
71
Q 114 Back
72
Q 120 Back
73
Q 121 Back
74
Defence Committee, 17 December 2008, Press Release Defence
Inquiry into Readiness and Recuperation for the Contingent Tasks
of Today Back
75
Ministry of Defence, Annual Report and Accounts 2007-2008 Volume
I: Annual Performance Report, HC 850-I, p 13 Back
76
Ministry of Defence, Annual Report and Accounts 2007-2008 Volume
I: Annual Performance Report, HC 850-I, p 132 Back
77
ibid. Back
78
Ministry of Defence, Annual Report and Accounts 2007-2008 Volume
I: Annual Performance Report, HC 850-I, p 136 Back
79
National Audit Office, Ministry of Defence Major Projects Report
2008, HC 64-I Session 2008-2009, pp 8-9 Back
80
Ev 103, para 9 Back
81
National Audit Office, Ministry of Defence Major Projects Report
2008, HC 64-I Session 2008-2009 Back
82
ibid, Summary, para 1 Back
83
ibid, Summary, para 3 Back
84
Ministry of Defence, Defence Plan including the Government's
Expenditure Plans 2008-2012, Cm 7385, June 2008, pp 30-31 Back
85
MOD Public Service Agreement Performance Report Quarter 1 2008-09,
October 2008, pp 12-13 Back
86
MOD Public Service Agreement Autumn Performance Report 2008-09,
December 2008, pp 13-14 Back
87
Q 324 Back
88
Q 325 Back
89
DE&S Business Strategy 2008-12, p 15 Back
90
Ministry of Defence, Annual Report and Accounts 2007-2008 Volume
I: Annual Performance Report, HC 850-I, p 145 Back
91
Ev 88, para 7 Back
92
Q 135 Back
93
Defence Committee evidence session on 4 November 2008 for the
MoD Annual Report and Accounts 2007-08 inquiry, Q 98, available
at www.parliament.uk/defcom Back
94
Ev 88, para 7 Back
95
Ev 104, para 4 Back
96
Ev 65 Back
97
Ministry of Defence, Annual Report and Accounts 2007-2008 Volume
I: Annual Performance Report, HC 850-I, para 218 Back
98
ibid, para 219 Back
99
Defence Committee, Tenth Report of Session 2007-08, Defence
Equipment 2008, HC 295 Back
100
Defence Committee evidence session on 4 November 2008 for the
MoD Annual Report and Accounts 2007-08 inquiry, Q 93, available
at www.parliament.uk/defcom Back
101
Ev 89, para 10 Back
102
Ev 89, para 10 Back
103
Defence Committee evidence session on 12 November 2008 for the
MoD Annual Report and Accounts 2007-08 inquiry, Q 163, available
at www.parliament.uk/defcom Back
104
Q 55 Back
105
Q 55 Back
106
Q 61 Back
107
Defence Committee, Tenth Report of Session 2007-08, Defence
Equipment 2008, HC 295, paras 71-77 Back
108
ibid, para 77 Back
109
Ev 88, para 9 Back
110
ibid, para 9 Back
111
Q 51 Back
112
Q 52 Back
113
Defence Committee evidence session on 12 November 2008 for the
MoD Annual Report and Accounts 2007-08 inquiry, Q 163, available
at www.parliament.uk/defcom Back
114
HC Deb, 11 December 2008, 67WS Back
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