19.Linked to the question of affordability of the Equipment Plan is the issue of how effectively the Department is able to secure the new capabilities it needs, assuming the money is available. A key part of each capability is the equipment contained within the Equipment Plan. To fully deliver the capability, the Department also needs sufficient trained personnel, information technology, and logistics and maintenance support. It estimates that around 20,000 civilians and military personnel are involved in delivering such capabilities.
20.The Department has struggled to deliver key military capabilities, including equipment in the Plan, to anything like the required timescales. Of 32 of its top priority programmes, timely delivery is considered at serious risk for one-third. The most common cause of delays is late or faulty equipment delivered by suppliers.
21.In its Acquisition Review, the Department acknowledged that over the years its Head Office has encouraged a culture which prioritises passing programme review points and securing approvals above delivery of outputs and outcomes, despite the best intentions of the Levene reforms introduced in 2014. Within the delivery teams in the front line commands, the mindset is to press on, even if they cannot fully demonstrate progress against formal milestones. Even in a relatively small sample of programmes, the National Audit Office found that there were over 100 ‘exceptions’ (or capability limitations) at the point of declaration of the main milestones. A number of these impacted upon the ability of the capabilities to perform as intended even after ‘full’ operating capability was declared.
22.Department witnesses involved in the process of signing off milestones acknowledged the risk of ‘groupthink’ in decisions to declare milestones, but insisted that such things did not happen in practice. However, information submitted to us separately about the Project Shepherd procurement illustrated a particularly serious example of such an occurrence, resulting in 2018 in the Department having to make a public correction to a past Equipment Plan. We still await the results of the Department’s investigation into this matter.
23.The Army’s Watchkeeper reconnaissance drone is an unfortunate example of what can go wrong with the Department’s current approach. The National Audit Office report sets out a litany of technical problems and delays which led to slippage of five years in declaration of Full Operational Capability (FOC). Even then, there were continuing restrictions on its use. The Department assured us the system was now deployable, but was reluctant to commit to its future beyond the mid-life upgrade in the mid-2020s. This raises the prospect of Watchkeeper being in service for considerably less time than the 13 years it took to get from business case to Full Operating Capability.
24.The Department wants to move away from a system that sets a rigid set of milestones in the business case, to a more flexible approach of delivering through ‘agile’ or ‘spiral’ development, which recognises that digitally based systems require constant upgrades. It is not yet clear what practices would replace the traditional approach of managing to a rigid set of milestones, and how teams across the Department could be explicit about the level of capability available at any point in time.
25.The Department told us that it is very worried about the impact of the COVID-19 virus on suppliers and it has increased monitoring of the sector’s financial health as part of a cross-government response. It has taken a ‘generous’ approach to suppliers, who can apply for payments in advance of delivering goods or services. Defence suppliers are classed as key workers and we were told that they have made great efforts to remain productive, for which the Committee would like to echo the thanks of the Department. Inevitably, however, observing government distancing restrictions has had an impact, which the Department is not yet able to quantify. The redundancies recently announced in Rolls Royce’s civil aerospace business, and the interconnected nature of the civil and military sides of the business, underline why the Department needs to be proactive in order to protect its interests.
26.On 13 March 2020, the Department announced it would lead a cross-government review into the UK’s defence and industrial strategy, which would in turn feed into the Integrated Review. It told us that the need to look strategically at short- and long-term plans to support the defence industry—a key part of the UK’s industrial base—was a “very, very live” issue in the context of the pandemic. In particular, discussions were underway about the need to maintain sufficient qualified and experienced personnel in key technical disciplines. Despite acknowledging the urgency with which decisions need to be made, the Department was unclear about the timetable for the Integrated Review, beyond “some time next year”.
27.The financial concerns of the sector, together with the challenges of continuing to work through the pandemic, will only worsen the already lengthy delays to the delivery of many key capabilities. The National Audit Office reported that, prior to the pandemic, the most significant capabilities were on average already one year late at Initial Operating Capability stage and more than two years late at Full Operating Capability stage, while almost one third are at serious risk of further delay. The Department replied that, by 2019, “only” 46% of programmes were running late, less than broadly similar evidence from ten years earlier. The most frequently cited reason for these delays is late or faulty equipment delivery by contractors.
28.The Department is implementing a range of initiatives to improve delivery, notably through its Project MAID (MoD’s Approach to Investment Decisions), which is designed to modernise the capability acquisition processes. This is designed to enable the Department to take a more strategic approach when developing business cases for new capabilities, and is under way in some cases. The Department also intends to become more agile by reducing the elapsed time from project inception to demonstration and manufacture, and by avoiding being over-prescriptive in its specifications. It told us this could take several years out of the process and quoted the Type 31 Frigate as an example of the new approach generating results. The Department is also seeking to learn the lessons from the innovative work done by the Defense Advanced Research Projects Agency (DARPA) in the United States, including how to increase the involvement of SMEs.
29.A detailed timetable for the wider roll-out of these new approaches was still in development at the time of the National Audit Office report. The Department told us that it is in a process of continuous improvement as recommendations are implemented. It also said that developing measures of the effectiveness of the new approach is difficult, and will take some time. These improvements will also need to address the wider issues with the Department’s project management, capacity and capability identified in the National Audit Office report. We want to see lasting improvements to the system and do not want to continue to criticise Department repeatedly for its wider problems with project management.
32 C&AG’s report (Defence capabilities), para 1.3
33 C&AG’s report (Defence capabilities), paras 1.8–1.9, 1.12
34 Q 78; C&AG’s report (Defence capabilities), paras 3.3, 3.9
35 C&AG’s report (Defence capabilities), paras 1.21–23
36 Q 60–4, 66, 67; Ev XX evidence submission from Lt Cdr Grantham
37 Chair’s opening remarks
38 C&AG’s report (Defence capabilities), Appendix 3, p48
39 Qq 71, 73
40 C&AG’s report (Defence capabilities), para 3.8; Q 77
41 Qq 34–36
42 Qq 56–9
43 , March 2020. Ministry of Defence
44 Qq 54–55
45 Q 50
46 C&AG’s report (Defence capabilities), Figure 3 and para 1.8
47 Q 21; C&AG’s report (Defence capabilities), paras 1.5, 1.12
48 Qq 76, 77
49 Qq 80–82
50 Qq 76, 80
51 C&AG’s report (Defence capabilities) para 3.8
52 Q 83
Published: 15 July 2020