Fifth supplementary memorandum from the
Ministry of Defence
Responses to further questions from the Committee
following the oral evidence sessions with Minister (DES), the
Chief of Defence Materiel and the Deputy Chief of Defence Staff
(Capability) held on 15 December 2009 and with Minister (SDAR)
and the Permanent Secretary, held on 12 January 2010.
15 DECEMBER 2009MINISTER
FOR DEFENCE
EQUIPMENT AND
SUPPORT
1. With regard to the reduction of the equipment
programme funding gap from £21 billion to £6 billion
during the previous planning round, what proportion of the reduction
was achieved by delaying activities beyond the 10 year horizon
of the programme? [Q454]
We will write to you separately with a response
to this question.
2. Why does the Minister believe that he
cannot provide further explanation of how the reduction from £21
billion to £6 billion was achieved? [Q472]
An explanation of the reduction is included
in the response to Question 8.
3. How can the Minister's refusal to provide
an explanation of how the funding gap was reduced be reconciled
with the assurance given by Lord Drayson that in the future the
affordability of the equipment programme will be open to public
scrutiny? [Q69212 January 2010]
In response to the Bernard Gray report, the
Department is committed to the publication of an annual assessment
of the future affordability of the Equipment Programme over the
10 year planning horizon. It is not envisaged that this will include
a detailed breakdown of future funding profiles for individual
projects as to do so would weaken the Department's commercial
position.
12 JANUARY 2010MINISTER
OF STATE
FOR STRATEGIC
DEFENCE ACQUISITION
REFORM
4. Please provide a copy of the information about
staff rotation referred to by PUS. [Q717]
The data relating to Project Team Leader average
length of tenure in 2009 shown in the table on Page 184 of the
Bernard Gray report was provided by DE&S, in response to a
request by Mr Gray's team. It was based on a trawl of Team Leader
post-holders for the 30 projects (20 post-Main Gate and 10 pre-Main
Gate) which had featured in the Department's Major Projects Report
for 2008.
Further to the recent sessions with Min(DES)
and Min(SDAR), representative DE&S Operating Centre data comprising
more than 100 Project Teams has been analysed in the table below.
For the purposes of this exercise, a Project Team Leader is defined
as a substantive officer in post with overall responsibility for
the delivery of one or more significant DE&S projects, and
who has either completed a tour or has a projected tour end date.
For each of the years shown in the table, the average tenure figure
is calculated by dividing the total time in post by the total
number of team leaders in the sample.
| 2007 | 2008
| 2009 |
Average tenure
in months | 39
| 39 | 40 |
| |
| |
The data presented provides evidence that there has been
no degradation in Team Leader tour length or adverse turnover
since the formation of DE&S.
Prior to the formation of DE&S, the risk of high turnover
of those occupying Senior Posts (including Project Team Leader
posts) was identified and a mechanism put in place to minimise
that risk; DE&S introduced Succession Planning to Senior Posts
as part of its internal HR agenda.
5. Please provide a note about the extent to which DE&S
Financial Management Posts are occupied by Qualified Accountants.
[Q720]
DE&S recognises the need to develop the skills of those
working in finance and is actively taking steps to do just that
through its Upskilling programme.
Within DE&S there are currently 244 designated Professional
Finance Posts (i.e. where an accountancy qualification is essential).
The designation is applied to all Finance posts where staff have
a financial letter of delegation and are responsible for approval
and scrutiny of expenditure proposals and plans. This covers all
Project Team Financial Controllers (generally at middle management
grades), and in large projects the Deputy Financial Controller.
It also includes Operating Centre Finance Team Leaders and deputies,
as well as specific posts in the DE&S Corporate Finance team.
At the end of December 2009, 63% of filled professional posts
were occupied by a member of staff with an appropriate qualification.
This has been increased from 50% when the posts were designated
and DE&S introduced its Upskilling programme. The DE&S
graduate Trainee Accountant Development Scheme (TADS) is a key
intervention to achieve the target of having 90% of posts filled
with appropriately qualified and experienced staff by 2012-13.
Currently 47 people are on the first stage of the scheme and 19
have graduated. Results have been very successful, with five trainees
gaining 10 Top 10 worldwide Chartered Institute of Management
Accountants (CIMA) exam results.
For other finance staff (middle and junior management grades)
DE&S provides training to gain the Association of Accounting
Technicians (AAT) qualification. All finance staff, and all staff
within DE&S at Pay Band B1 level and above are required to
hold the Department's internal finance licence. We also have 48
designated Professional posts filled by qualified accountants
in the Cost Assurance and Analysis Service.
We acknowledge that recruitment of qualified accountants
is difficult across the public sector as we often cannot offer
salaries to match those that accountants could earn in the private
sector. That is why we invest heavily in developing our own skills,
through the Upskilling programme and the TAD Scheme. Once qualified,
our accountants working in middle management grades receive an
additional allowance as recognition of the extra skills gained.
They are required to comply with the Continuous Professional Development
(CPD) requirements of the MoD and Professional Institutes to continue
to receive this payment. The amount paid is £3,000 per annum
for those at the top of the middle management group and between
13% and 15% of their salaries for the lower pay bands.
6. Which of the decisions taken as a result of the short
examination of the equipment programme contributed to the reduction
in the 10 year funding gap? [Q729]
The decisions are set out in reply to Question 8.
7. What did ministers say at the time about the cost of
delaying the carriers? [Q734]
During the oral evidence session on 12 January 2010, it was
suggested by the Committee that the previous Secretary of State,
John Hutton, had stated the decision to delay the introduction
into service of the Queen Elizabeth Class carriers would incur
no cost for Defence. The official record (11 December 2008, Column
66-67 WS) shows that he did not state this. In response to a question
asked in the House on 12 January 2009 (Official Record Column
76W) Mr Hutton acknowledged that additional costs would result
from the decision to delay the in service dates. He advised that
"We have estimated the costs of a delay to in-service
dates in close consultation with the Aircraft Carrier Alliance
and other stakeholders". Mr Hutton declined to give a
figure at that stage to safeguard the commercial interests of
the Department.
During the Defence Procurement Debate on 20 April 2009 (Official
Record, Column 54) Minister (Defence Equipment and Support)
provided further clarification. He said "if something
is delayed, it tends to cost more in cash terms". He
also explained that "When I said that there were no defence
costs, I clearly saidthe record will prove itthat
there was no loss to the nation's defence capability". He
was referring to his earlier statement when giving oral evidence
to the Defence Committee on 16 December 2008 (Q308).
On 16 July 2009 (Official Record Column 589W), Minister (Defence
Equipment and Support) advised "The new cost will be at
least £4.6 billion but we are not yet able to provide a final
estimate."
8. Please provide the "fuller note" offered
by PUS regarding the make-up of the £21 billion funding gap,
and how it was reduced to £6 billion. [Q736]
At the start of the 2009 planning round, before we undertook
the Equipment Examination, we assessed that the cost of the future
Defence Programme exceeded the projected Defence Budget by £21
billion over the then 10 year planning horizon. This estimate
reflected a number of the cost pressures we have faced over recent
years including rising fuel and utility costs, increases in pay
and pensions and cost growth on major equipment projects.
As a result of the Equipment Examination and wider 2009 planning
round activity, we removed approximately £15 billion from
defence spending plans over the 10 year planning period. The Equipment
Examination removed much of this excess and included the following
measures:
Restructuring the FRES programme, including delaying
the FRES Utility Vehicle, which removed approximately £2.6
billion over the 10 year planning period;
Delaying the new aircraft carriers by one to two years,
which removed £450 million over the first four years of the
planning period, though it added £674 million over the 10
years;
Deferring the fleet tanker element of MARS, which
removed approximately £210 million over the first four years
of the planning period, though it added approximately £41
million over the 10 years;
A reduction in the Lynx Wildcat contract from 70 to
62 aircraft which removed approximately £194 million over
the 10 year planning period
The deferment of future increments (B & D) of
the FALCON armoured and mobile trunk communications system, which
removed £53 million over the 10 year planning period.
A reduction in the number of Merlin Mark 1 helicopters
to be upgraded through the Capability Sustainment Programme, which
removed approximately £65 million over the 10 year planning
period.
A further approximate £7.8 billion was removed through
other programme changes in the Equipment Examination. The 2009
Planning Round delivered a further £3.3 billion of reductions
to the 10-year equipment programme. This included savings in the
early years arising from the delayed introduction of A400M; and
a revised production timetable for Astute, which removed £131
million over the first four years of the planning period, though
it added £539 million over the life of the programme.Various
other changes to the wider defence programme made up the remainder.
Most of these related to changes in internal planning assumptions,
on which we do not as a rule comment. Their general disclosure
would preclude the full and frank discussion of planning options
as well as affecting our commercial negotiations with industry.
After changes resulting from the Equipment Examination and
the 2009 planning round, we assessed that an excess of approximately
£6 billion remained over the forward 10 year defence programme,
assuming the Defence budget remains constant in real terms. This
represented the starting position for the current planning round,
and although that process continues, we were able to announce
a number of measures on 15 December 2009 which have removed some
of the cost pressures while finding room for £900 million
of enhancements for current operations. Work continues and remaining
cost pressures will be addressed in the course of the planning
round and the forthcoming strategic defence review.
5 February 2010
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