Examination of Witnesses (Question Numbers
1-19)
GENERAL SIR
KEVIN O'DONOGHUE,
DR ANDREW
TYLER AND
MR GUY
LESTER
1 DECEMBER 2009
Q1 Chairman: Good morning and welcome
to this the first evidence session on our Defence Equipment Inquiry.
Chief of Defence Materiel, you have been before us before but
would you like to introduce your team, please?
General Sir Kevin O'Donoghue:
Thank you very much: Dr Andrew Tyler, who is the Chief Operating
Officer from Defence Equipment and Support; and Mr Guy Lester
who is Director Equipment Resources from DCDS Capability's area
in the Main Building.
Q2 Chairman: Thank you very much
and welcome. It has been a very eventful year in defence equipment
issues. One of the things that has happened has been the production
of the Bernard Gray Review of Acquisition, produced at the request
of the previous secretary of state, with the assistance of a team
from people within the Ministry of Defence. I think it would be
right to divide that review into the analysis that it does of
the problems with defence procurement which have gone on for many
years now, and the solutions it proposes to those problems. Dealing
first with the analysis of the problems that it proposes—and
I would be grateful if you could keep this to a few sentences
and a few concepts—do you, by and large, accept the analysis
of the problems?
General Sir Kevin O'Donoghue:
I accept that he identified two areas where we need to do better.
One is that the programme is overheated; I accept that.
I do not agree with his figures and—as Quentin Davies said
in Top Day after the report was produced—there is not a
lot of evidence for the actual figures. I accept the equipment
programme is overheated; and I accept that we need to do better,
although I am very happy to come back and talk about what we are
doing much better, project initiation and how we get projects
into the programme. As far as his analysis is concerned, that
is where I sit.
Q3 Chairman: The analysis was quite
detailed as to how some of the problems leading to this overheating
arise. Would you not accept the details of those problems, the
analysis of those problems?
General Sir Kevin O'Donoghue:
I do not accept the maths, no. There is very little evidence in
the report for the maths. I turn to Dr Tyler who could give you
some examples of where perhaps that evidence is thin.
Q4 Chairman: Through Life Capability
Management he describes as "fearsomely complex". Would
you agree with that?
General Sir Kevin O'Donoghue:
No, I do not. It is new. You will recall, and we have discussed
this in this Committee before, some time ago we had Through Life
Equipment Management which Peter Spencer and I were struggling
with. Putting DE&S together as one organisation has made Through
Life Equipment Management much easier to deliver. This is Through
Life Capability Management which is of course pan-department,
not just DE&S. It is not easy; it needs working at. If it
was easy we would have done it many years ago, but the prize is
well worth seizing for Through Life Capability Management and
I do not agree that it is as complex as Bernard Gray suggests.
Q5 Chairman: The suggestion exists
in his report on page 125 that since the merger of the DLO and
Abbey Wood there has been a serious deterioration in time slippage
and in cost slippage. Would you accept that?
General Sir Kevin O'Donoghue:
No, I do not. Cost slippage, as I think you will see—I believe
the NAO will report shortly in the MPR—is more to do with
conscious programme decisions, or collaboration with our partners,
or foreign exchange, than problems with the project teams. There
is time slippage, I accept that: A400M, for example, is the biggest
time slippage. No, I do not accept that it has got worse; in fact
we have turned the corner. Since the Tyler/O'Donoghue team kicked
off with DE&S 18 months ago I think we have turned the corner
and we are beginning to see really quite a lot of progress. Astute
has sailed and there are MRA4s heading in December 10 to the RAF.
You perhaps do not know that the first Chinook Mk3 was taken over
by the RAF this morning. I think we have got a good tale to tell.
I do not accept what is in Bernard Gray's report, although I do
accept the broad analysis.
Q6 Chairman: I see. Staff reductions:
are you going to be making significantly greater staff reductions
than have already been achieved?
General Sir Kevin O'Donoghue:
I have always said, and I think I said to this Committee last
year, I believe that DE&S can come down to a figure of 20,000—we
are at about 22,000 now; but there is a proviso, a caveat, that
we must spend money on re-skilling and up-skilling if we are to
get down to those sorts of numbers. I believe that is the right
number of people within DE&S, but they need to be in the right
place and they need to have the right competences and, therefore,
we are going to have to spend money on re-skilling and up-skilling.
Q7 Chairman: That is a part of the
Bernard Gray review that you would accept, that there is a shortage
of the relevant skills?
General Sir Kevin O'Donoghue:
I do and I could explain the areas where I do think there is a
shortage of relevant skills, if you wished?
Q8 Chairman: Yes, please.
General Sir Kevin O'Donoghue:
I think there are four main areas.[1]
One is in cost estimating, which I do accept we are not that good
at it and I divide that into three areas, initial cost estimation,
parametric costing. If you look at some of our equipment projects
which have out-turned with cost growth, when the parametric costing
has been done after the event they have cost about what they should
have done. The second area is cost engineering, getting involved
with the contract lawyers and the contract officers from big companies.
The third area, under cost assurance, is cost validation after
the contract is signed. I am short of people with those cost estimation
skills and we are currently recruiting people to increase the
size of our cost estimation service. I have got about 300 of them;
I need about 420 of them.
Dr Tyler: We should also add that
there are some areas of engineering discipline—
General Sir Kevin O'Donoghue:
There are other areas but just on cost assurance.
Q9 Chairman: Do you think you have
the right financial tools to do that cost assuring consistently
used across the Department?
General Sir Kevin O'Donoghue:
No. No, they are not. I would agree again that the cost estimation
tools we need to push right across the Department.
Q10 Chairman: That is another area
in which you accept the detail of the Bernard Gray report?
General Sir Kevin O'Donoghue:
Indeed. What I said I did not accept was his maths and the something
between £1-2 billion adrift, which is what I think he says.
Q11 Chairman: Okay, so it is just
the maths that you do not accept?
General Sir Kevin O'Donoghue:
I do not agree with his maths, no.
Q12 Chairman: As for the analysis
of the problems, leaving aside the maths, do you accept the general
thrust of the analysis of the problems?
General Sir Kevin O'Donoghue:
As I have said, I accept that we have an overheated programme;
and I accept we are not good at project initiation. Part of that
is cost estimation; part of it is financial accounting, which
is the second area; part of it qualified engineers, both project
engineers and programme engineers; and a part of it is technical
assurance, which we are not good at. What we are very good at
doing is assuring a process. What we are not good at doing—and
there are some quite good examples—is being absolutely clear
in our mind before Main Gate is agreed that the project is doable.
Q13 Chairman: Do you accept that
the programme is overheated because of the matters identified
by Bernard Gray?
General Sir Kevin O'Donoghue:
It is partly overheated because of cost estimation—I would
accept that. It is partly overheated because our aspirations are
always much greater than the money we have available.
Q14 Chairman: That is explained by
Bernard Gray?
General Sir Kevin O'Donoghue:
Yes.
Q15 Mr Jenkin: I am glad to hear
you are tackling the people issue. It is said that there are more
people in the helicopters IPT than work for Finmeccanica Westland
in Yeovil. I do not know whether that is true, but you would agree—
General Sir Kevin O'Donoghue:
No I do not agree. I am sorry!
Q16 Mr Jenkin: It is one of those
apocryphal things that floats around—I am glad you have
corrected it! Numbers of people who are regularly moving through
your organisation, moving in and moving out, are no match for
industry people who are permanently fixed in their companies and
see people in IPTs come and go. Are you addressing that problem?
General Sir Kevin O'Donoghue:
No, I do not actually agree with you. I think that, as far as
project management is concerned, DE&S is the best in government,
and I am not too sure we are not the best across industry as well.
Q17 Mr Jenkin: "Best in government",
I was going to say that might not be a very good comparative!
Surely somebody who is fixed in Finmeccanica Westland for 20 years
is going to know the ropes better than people who are two or three
years in the helicopters IPT and then move on to something else,
which is typical with military people?
General Sir Kevin O'Donoghue:
The reason the military are there is to bring current operational
experience, and it is less important that they stay there forever.
Civil servants are the continuity, they actually produce that
deep continuity and the understanding of the business. There are
some outstandingly good military project team leaders and they
tend to stay two or three years. This is not a constant flowing
structure.
Q18 Mr Jenkin: Is the fact that people
leave your organisation and then go and work for industry a cause
for concern? Does that create a conflict of interest?
General Sir Kevin O'Donoghue:
It depends what level they are at. It is a cause for concern if
they are really good people; that would give me cause for concern.
Q19 Mr Jenkin: Are your people not
looking across the table thinking, "I might want a job with
this company in five years' time, I'd better be nice to them"?
General Sir Kevin O'Donoghue:
We have got the checks and balances in to make sure that does
not happen.
Dr Tyler: We do not have a large
flow-out of good staff, or staff period, into industry. Actually
when we do very often it is to our advantage because, as you know
very well, industry is an integral part of our enterprise—we
rely on them utterly for delivery—and in many cases when
they do go into industry they take a lot of knowledge about the
way that we operate as a customer, and their close experience
of our user. They take that into industry and that can be very
useful to us; as can the opposite, where we have people from industry
coming into the MoD. But there is no great flux of this going
on day in/day out. There is a lot more stability than I think
your question is intimating within all of the areas in DE&S.
If you take the helicopters operating centre just as a "for
example", yes, you would find some turnover of military staff,
but as CDM has said that is bringing frontline operational experience
into the operating centre which needs to be kept very, very current.
If you looked in the Civil Service population, which would be
something like 75% of the helicopters operating centre, you will
find specialists there who have spent either all or very large
amounts of their career in the helicopters area. It is important
that we also complement that with a certain flux between the different
operating centres. One of the reasons for that is, quite often
we are pioneering a business model, a commercial model in one
part of the business when, if it is proved successful, we then
want to pervade that over into other areas of the business; and
the best way to do that is to have some level of staff movement
to bring those ideas and apply them in different areas of the
business.
Mr Jenkin: I am sorry, Chairman, I should
put in record I have an interest on the Register, an unremunerated
interest, that Finmeccanica supported a charitable event I was
involved with. I apologise for not mentioning that before, but
I do not think they will thank me for asking those questions.
1 Ev 113 Back
| 
