View Full Version : Defence cuts 'led to MoD project cost rise'
16th Nov 2011, 13:10
BBC article today;
BBC News - Defence cuts 'led to MoD project cost rise' (http://www.bbc.co.uk/news/uk-politics-15749136)
16th Nov 2011, 13:18
Somebody buys a product at an agreed price, the supplier orders the parts, trains the staff, begins the construction process etc; the buyer then comes along and says, I don't actually need it for another 12-months; the staff still need to be paid, the bits need to be stored somewhere, the supplier will be paying interest on the money he's borrowed for the project. End result - the price goes up; I'm surprised that the Committee are surprised by this.
16th Nov 2011, 13:26
In the meantime, extra cost is incurred while trying to keep the original clapped-out items 'soldiering on' pending their delayed replacement.
(Sorry for the additional BGO: Blinding Glimpse of the Obvious.)
16th Nov 2011, 15:22
If we weren't bound by EU Competition Procedure, procurement could be quicker and easier I'm sure
The Helpful Stacker
16th Nov 2011, 15:22
Shadow defence secretary Jim Murphy said the latest overspend figures were "almost unbelievable".
"An efficient procurement policy is central to an effective defence policy. The government have neither. Ministers need to start taking responsibility for their actions.
"We need a new defence industrial strategy which builds equipment to fit requirements, has tough targets on time and cost for industry and ensures greater accountability within the MoD."
I wonder if he managed to keep a straight face whilst saying all that?
If I remember right a certain political party who held office not too long ago had a bit of a taste for 'extending' major military projects or alternatively using the old 'on the never never' PFI route.
I'm far from being a tory voter but I can't let an MP get away with comments like that, no matter which party they represent.
16th Nov 2011, 17:14
Brought to you by.......
I take it Mr Murphy is new to the game? He'll soon learn.....
16th Nov 2011, 19:22
ERR - Thinks
17th Nov 2011, 00:13
Don't you just love it when "experts" make the headlines by stating the bleeding obviouis? Perhaps they should exercise their planet sized minds on the principle of Resource Account Budgeting, That might open up a whole new money paper chase and explain a number of illusions.
dropintheoggin. If it's any consolation, warlike stores are exempt from advertising in the European Journal. Also, it seems, are nationally strategic manufacturing capability stores. The clue there is trains supplied by Siemens from Boxland versus trains supplied by Bombardier from Canukland from facilities in Blighty.
I wonder how much net revenue the Crown gained from the reduced to produce Nimrod 4s.
17th Nov 2011, 08:52
Perhaps they should exercise their planet sized minds on the principle of Resource Account Budgeting, That might open up a whole new money paper chase and explain a number of illusions.
Quite right. When RAB (Random Asset Budgeting) came in, we were told to “manage” it with fewer resources. The practical effect was that experienced project manager posts were chopped and admin “RAB Managers” brought in.
Apart from duplicating much of what the Equipment Accounting Centre in Liverpool did anyway (the “random” part), the desired effect was to slow down programme expenditure because the lack of manpower and extra hoops meant slower progress. It was a savings measure by stealth.
If they want to know what is wrong with “procurement”, look no further than what various 1 and 2 Stars now do at AbbeyWood. Their tasks seem to be more or less the same as the most junior project manager’s 20 years ago. Dumbing down is the phrase I’m looking for. If 1/2 Stars are doing the most basic tasks, what are the lower grades doing? (In many cases, the higher level work, but without support or guidance).
Time for Bernard Gray to implement his own recommendations, now he’s in a position to do so. Money where your mouth is, or ship out.
17th Nov 2011, 20:57
Your usual clarity is missing. Did we really have a random asset budgeting procedure? I'm losing the ability to distinguish irony and reality.
17th Nov 2011, 21:10
Do you mean in practice ('yes'), or in principle ('no').
17th Nov 2011, 21:11
Amyas Morse, the head of the NAO, added: "These circumstances were largely, however, of the department's making and the resulting cuts and delays to capability are not value for money."
However, from the NAO website......
Comptroller and Auditor General
Amyas Morse was appointed Comptroller and Auditor General on 1st June 2009.
Amyas Morse - Comptroller and Auditor GeneralAmyas was born in Edinburgh, and is a member of the Institute of Chartered Accountants of Scotland. He led the Coopers and Lybrand practice in Scotland, before moving to London to manage the London City Office. He subsequently became the Executive Partner of the Coopers and Lybrand UK firm. When PricewaterhouseCoopers was formed, he took on global responsibilities, and served as Global Leader of Assurance practice (audit and related services), and then as Global Managing Partner (Operations).
Amyas Morse joined the Ministry of Defence in July 2006 as the Defence Commercial Director. During his time as Defence Commercial Director he was responsible for shaping the Department’s relationship with industry, and he played a key role in the agreement of strategic commercial arrangements. More widely across government, he served as a member of the Major Projects Review Group, the Public Sector Board of the Chartered Institute of Purchasing and Supply, and on a National Health Service Project Board.
17th Nov 2011, 21:16
Always thought defence procurement was a conspiracy between MoD procurement and industry against the tax payer (or Treasury for that matter). MoD ask for something that can't be built at the budgetted cost or schedule, industry pretends that it can, MoD pretent to believe them (and then delay start up for 6 months and expect no schedule impact to which industry is happy to agree).
17th Nov 2011, 21:50
can't comment on MOD spending, but I've just finished a contract within another Government department where I discovered that the on-site computer support team were prohibited from exchanging faulty keyboards: instead a contract team had to be called in. Each keyboard was being charged out at £75
I can buy keyboards in pallet loads at around £2 / each. And thats probably expensive...
18th Nov 2011, 06:03
Mixture of both I'm afraid.
When we were hit with RAB in about 1997 there was a lot of beancounter stuff that we ignored in an attempt to keep programmes on target and within cost, but we did spot a lot of the tasks duplicating those we knew (a) EAC did and (b) Service "Customer 2" (as they were known) should have done, but didn't.
When challenged on this, the RAB trainers (who we tried to avoid at all costs) admitted they had never heard of EAC, and were not amused especially as RAB carried out largely random sampling whereas EAC were more comprehensive with mandated annual audits of, for example, equipment on loan to companies. (At the time, the equipment we were under contractual obligation to loan on one of my smaller programmes was valued at over £400M). EAC, ourselves and the "old" system were completely on top of this, but RAB toppled at the sheer scale and picked a few items at random to monitor (not manage). They certainly never carried out any audit.
And they had no idea that MoD(PE) didn't actually "own" very much kit (B Models and the like) - that Customer 2 was meant to have a niominated "owner" of each item in the inventory and it was he, not PE, who dictated and controlled disposition. That system of "ownership" and hence accountability was still mandated, but had been ditched in another savings measure in the late 80s. Therein lies the reason why Services stopped quantifying requirements; and if you don't quantify, how can you cost accurately? Hence, you get people saying programmes are "over budget", when the budget is clearly based on a false premise. Many programmes are over budget but within a fair and reasonable cost for the actual requirement.
18th Nov 2011, 10:07
Service needs a new fighter because the old one is u/s, g-limited and they've run out of spares for the radar.
Industry says it can build a new one, but spread the cost by forming a partnership with other nations that don't have the experience or technology.
One of the nations changes the plans, imposing all sorts of size limitations so the kit won't fit. Said nation then withdraws from the programme and builds their own jet in a fraction of the time at a fraction of the cost.
Service changes the requirements.
Industry adds 3 years to programme to accommodate changes and hands MoD huge bill for redesign.
Country building left wing does it differently to country building right wing. Delay and more cash to fix.
Service changes the requirement. More costs, more delays.
Radar can't see through radome. More costs, more delays.
Countries change their minds about how many to buy. More costs, more delays.
Service asks, "Can't we just buy a load of F-15s instead?" Government says "No, British industry, etc. Have a budget cut instead."
MoD has to cut numbers. Government says they can't. Therefore, slow down the buy. More costs, more delays...
You get the idea. More than half the cost overruns are caused by delays because the Government won't commit to the full spend so the MoD has to order stuff "at risk". :ugh:
18th Nov 2011, 11:45
Guardian broke the story this morning "MoD spent £600m on consultants" here:
MoD spent £600m on consultants | UK news | The Guardian (http://www.guardian.co.uk/uk/2011/nov/17/mod-consultants-specialists-fats)
It's been picked up and commented on by most of today's papers.
18th Nov 2011, 12:21
That sounds suspiciously like a real programme, except your example at least had the sense to make a left and right wing, not two lefts! :E
I often look at MoD’s procurement problems in terms of Direct and Indirect Labour.
Direct Labour is all the people directly involved in the delivery of the product or, for example, those in a workshop directly involved in the repair of the product.
The rest and Indirect – overheads.
Workshops are a good example and easy to understand. Conventional wisdom is to maintain a Direct/Indirect ratio of something like 60/40, but of course this changes depending on the type of work involved. But you get the idea.
In procurement, you’d imagine the Programme or Project Manager would be Direct Labour, wouldn’t you? In fact, there are many examples of the PM being Indirect. Not only a costly overhead, but a positive hindrance, with the lower level Direct staff desperately trying to ignore him and get on with the job.
A real example. I don’t regard a minutes secretary as Direct Labour. One IPT I worked in had two civilian Grade C2s working on the same programme. (For those who don’t know, the Treasury/Union agreed Grade Descriptions require an MoD C2 to have demonstrated the competence to, for example, manage a workforce of up to 200 Industrial employees or - preferably and - have successfully managed scores of projects from initiation to delivery). One of the C2s had this experience, in spades. The other was a minutes secretary at minor meetings. This huge discrepancy in competencies, experience and Job Descriptions is major problem in MoD. Generally speaking, you don’t see it in the Services. Take 20 Sqn Ldrs and there isn’t much between them. Take 20 MoD C2s (or any grade) and they range from supreme competence to unemployable anywhere else. Oh, and in my example the boss (the personification of Indirect Labour) regarded the minutes secretary as undertaking the “high grade work” and the guy who was delivering £100M worth of programmes ahead of time, under cost and to a better spec as, essentially, a training grade and unsuitable for promotion until, presumably, he learned to press “record” and type. I’m sure many in MoD will recognise what I’m talking about.
Have a look at AbbeyWood or wherever you work and ask what the Direct/Indirect ratio is. And if Bernard Gray were to suddenly apply those Grade Descriptions in DE&S, very few would be promoted in the foreseeable future as they’d be required to retrospectively attain competencies and experience. Now, there’s a thought.
18th Nov 2011, 12:33
Bernard Gray's main recommendation was to privatise DE&S. It was rejected by the MoD but IMHO, that would be the very best outcome. Give procurement to the likes of PWC or such and you would use a fraction of the staff, have better control of costs and have competent staff (the useless ones could be fired!).
18th Nov 2011, 12:44
Totally agree with you.
I have worked both in the Civil Service and Local Government.
The people who are actually doing the work, usually to a very high standard are treated as pond life and not worthy of much. Nearly all of the so called managers and leaders I have come accross are completely unemployable anywhere else. The result? The good ones leave.
We have the Civil Service and Local Government we deserve.
18th Nov 2011, 14:08
I take your point, Widger, and PWC are a very capable company. However, our experience of contracting out anything hasn't exactly been great, has it? Partly because virtually every MoD contract is seen as a massive cash cow and partly because the companies' lawyers are bigger than ours so the contracts always end up favouring the manufacturer/supplier/contractor.
APG63, you remember too much! The Typhoon Police will come and find you! As I recall, we said,
"Your radome isn't compliant with our radar."
The Germans said,
"Your radar isn't compliant with our radome!"
So we had to take another price hike to bolt the antenna on 90° out to change to polarization. So, yes, budget cuts do put up prices, but so does contractor incompetence.
18th Nov 2011, 16:28
You are correct as always. However, Mr Gray also seemed to somehow ignore the other end of the M4, which in my experience is at least as dysfunctional as ABW and needs fixing with at least as high a priority. Many of the "issues" in DE&S are directly attributable to the folk in MB (and the Treasury implants therein).
19th Nov 2011, 09:58
Not_a_boffin. Remember that indispensable component of the Managers' tool box; the long screwdriver. Unfortunately, the screwdriver only ever seemed to point westwards (unless you worked in Bath).
21st Nov 2011, 13:44
Mach Two - I was working on the project at the time....
...apparently, with the Germans narked at workshare (the FCS, engines, radar, and airframe all by now being British-led) they took on the radome. They hadn't quite appreciated how difficult it was to make an RF-transparent pointy thing that's still strong enough to be thrown about the sky at high speed. When we finally got the results of radar/radome integration, it all went pear-shaped. Refraction's a sod...
They admitted fault (by not meeting the originally-agreed and carefully-written requirement specification) and we provided a solution... there wasn't much of an argument from the radome manufacturer, apparently one of the visual demonstrations of the effect was rather graphic.
21st Nov 2011, 13:57
Yeah, that rings bells GB. Great engineers the Germans, but they had so little recent experience in that field - a bit like us when we were building AI24!!!!
22nd Nov 2011, 12:13
Foxhunter!!! Actually, I think it looked good on paper, but the technology wasn't quite ready for the plan. But, again, a poorly written, cost-plus contract, awarded to the wrong company (because of previous naughtiness by the only competitor - milking Bloodhound, I think) with the MoD as prime contractor! Then the MoD wanted extra modes that it hadn't think to ask for: stern capability, combat modes, etc.
Was there a case of budget cuts causing the price to rise here? Maybe not initially, but once we struggled past B, W and Z list versions it all started to go horribly wrong. Rather than get it all sorted we "spread the cost" over numerous expensive upgrades, which cost a lot more in the long run. When you hear figures like 63% over-budget and 4 years late, that was only to a working, sub-spec radar in the jet. It took a lot more cash and a lot longer to get to Stage 2 (let alone beyond).
Hope I haven't gone off topic here!
22nd Nov 2011, 14:43
I wouldn't worry about going off topic - everyone else on here does it at some point, so you won't be alone!