Supplementary memorandum from the Ministry
of Defence
Q1. To what extent
will continued reliance on separate land and air IT systems (on
the operating side) restrict the possibility of realising future
synergies within DSG?
A1. DSG does not anticipate that operating
two bespoke IT systems across the land and air businesses will
impede or restrict its ability to realise future synergy benefits.
Q2. In Q13 there is reference to the activity
of "land supply" now being carried out by staff at Sapphire
House. The Committee would appreciate a short note setting out
where this activity was carried out before, and what happened
to those staff who carried out this activity when Sapphire House
was brought into DSG. It would also like to know how much money
was saved from this development within DSG.
A2. Staff undertaking the procurement and
provisioning activities in Sapphire House, Telford transferred
internally from DE&S to DSG on 1 September 2008. This followed
DSG's proposal to take on these activities with the aim of delivering
future synergy benefits and savings to the MOD customer, and this
proposal was accepted and endorsed by Ministers in December 2007.
This meant that staff based at Sapphire House would not have to
relocate to the South West as originally planned under the DE&S
Collocation Project but would instead transfer to DSG. Part of
the transfer process included a Voluntary Early Release scheme
which helped realise staff reductions of 94 with subsequent savings
of £3.88 million.
Q3. In Q13 there is also reference to savings
of a "fair amount of money in material costs and things of
that nature". To what specifically does this refer, and how
much was saved?
A3. DSG anticipate savings of £2.2
million on its planned material spend in 2008-09. Further non-staff
related savings of £1.9 million are anticipated in Information
System expenditure and an additional £1.1 million from areas
such as HR, finance and consultancy expenditure.
Q4. The Committee would appreciate a note
setting out DSG's possible participation in the Equipment Sustainability
Solution in Camp Bastion, and when the full extent of this participation
is likely to be confirmed?
A4. The Equipment Sustainability Solution
(ESS) at Camp Bastion will be delivered in two distinct phases;
construction followed by the delivery of a repair capability.
The project is being managed by PJHQ with their prime contractor
for both phases being KBR.6 DSG are being invited to participate
in a very small way for the construction phase by giving specialist
advice to the project on infra-structure and facilities aspects.
The construction phase is due to complete in Apr 2010. Negotiations
continue on aspects of the commercial contract for the repair
capability phase, and KBR as the prime will be required to run
a sub-contract competition for the various elements of delivering
the repair capability. Due to their position within MoD; their
proven track record; their knowledge of the equipments, and their
security status in regard to repairing certain sensitive equipments,
DSG will be invited to participate in that competition, however,
successful award of a sub-contracting role in providing a repair
and maintenance capability at the ESS, is predicated on DSG's
ability to provide an overall value for money and affordable solution.
It is anticipated that sub contract elements to the prime contract
will be awarded later in 2009.
Q5. In Q87, Mr Hughes says that "about
20% of what I do is contracted via industry at any rate".
The Committee would like confirmation of the proportion of DSG's
work for which it is the MoD's prime contractor, and the proportion
of DSG's work for which it is a sub-contractor to industry. It
would also like confirmation of whether this proportion is by
turnover or by capacity.
A5. 81% of DSG's work, by turnover, is contracted
directly to the MOD with 17% as a sub-contractor to industry and
the remaining 2% of turnover comes from wider market customers.
Q6. The Committee would also be grateful
for an indication of when DSG expects to submit its five year
strategic plan to Ministers and when it expects this plan to be
agreed by Ministers. The Committee would also like to know when
DSG expects to publish its first Annual report.
A6. DSG plans to present its Corporate Strategic
Plan to the Minister in March when its next Owner's Advisory Council
meets. DSG anticipates publishing its first Annual Report and
Accounts once they are laid before Parliament, which it expects
will be in early summer 2009.
18 February 2009
6 KBR is a US engineering and construction company.
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