From the National Audit office report

[311 fan]

From HC 190 2012-2013

Equipment used to drop bombs from the older model of the Nimrod maritime patrol aircraft.7 Central depots have issued an average of 43 of these in the previous two years, but still hold 54 years of stock. Following our analysis, the Department confirmed these items should have been disposed of in 2010 when this model was retired from service

54 years of stock?

[Jimlad1]

In a nutshell - if a fleet of roughly 20 airframes uses kit at a steady state of 2 - 3 widgets per year, and 2 years kit is held, then the department would hold 60 widgets.

If said fleet is reduced to 2 useable airframes, and useage rates remain the same, then suddenly the Department has 60 widgets, and 20-30 years worth of stock.

The stats look bad until you consider that equipment is purchased some time ahead based on planned maintenance routines and useage rates, and is often purchased prior to political decisions to reduce, or remove airframes from service.


Great tabloid headline though!

[tucumseh]

While Jim’s scenario is of course correct, what is of real concern here is these committees choose to ignore solid evidence of senior officers and politicians condoning deliberate waste.

The subject here is aviation stores. Pre-June 1987 it was policy to have Max/Min stock levels, the ideal being a stores demand was satisfied in accordance with the FUD system. (i.e. priority 02-04 in 48 hours, or whatever).

Then, in 1987, AMSO (it’s ok, he doesn’t seem to post here anymore after the Mull of Kintyre evidence revealed what I’m about to say) formulated a policy whereby perfectly serviceable stores were scrapped; the effect being the FUD system collapsed. By definition, as a matter of policy the Repair Turn Round Time now included the manufacturing lead time of the spares required.



Then, in April 1990, one of his successors introduced what was colloquially known as the “Not in Time” policy, whereby the above policy was extended to routine Unit demands (as opposed to those required to effect 3-4th line repairs). Contracts to replace consumed spares where not initiated until there were outstanding demands. Similarly, by definition your demand was outstanding for at least the Admin and Production lead time.


To be fair, this policy was amended to “Just in Time”, which at least acknowledged demands should be met in a reasonable timescale. (Just in Time is, rightly, much maligned, but very few realise it was actually an attempt at improving the situation brought about by AMSO). However, as the funding baseline was “Not in Time”, the money had to be found from somewhere to re-stock the shelves. The “solution” was to reclassify Repairable kit (especially avionics) as Consumable, thus avoiding the cost of repairs (which simply hid the problem for a few months, until the incumbents moved on). Also, War Reserves were scrapped (just as we were undergoing TTW for GW1). The significant funding pot that was robbed to pay for this was the airworthiness one. We know what that caused, which is the best indication of the long term effects of AMSO’s policy.


Despite having all this evidence in front of them for the past umpteen years, no committee has ever mentioned it. Why? Always ask who is protected by this not being revealed. The answer is – those who sign off the reports in MoD, and their VSO predecessors/mentors.

[Yellow Sun]

Equipment used to drop bombs from the older model of the Nimrod maritime patrol aircraft.7 Central depots have issued an average of 43 of these in the previous two years, but still hold 54 years of stock. Following our analysis, the Department confirmed these items should have been disposed of in 2010 when this model was retired from service

I bet that it's the "biscuits" they've got.

YS

[Wensleydale]

I bet that it's the "biscuits" they've got.



More like the supply of DCS.

[Brewster Buffalo]

Some more quotes from the report

"The Department holds £4.2 billion of inventory that has not moved in over two years and a further £2.4 billion of holdings sufficient to cover five years of use. However it spent £1.5 billion in 2009-10 and 2010-11 on consumable inventory that it has not used"

"During 2010 and 2011, these central projects identified £1.4 billion (gross) of inventory that could be sold or destroyed."

"At the end of November 2011, 20 per cent of inventory management posts were vacant, and of those staff in post, 13 per cent had not obtained the appropriate qualifications"

"However, the root cause of the excess stock is that management and accountability structures fail to provide the incentives to drive cost-effective inventory management."

[Pontius Navigator]

Tuc, I recall seeing lots of sealed packs of helo spares at Finningley around 1990. IIRC they were dated around 1963 so guess they were for the old Whirlwind.

BB, on holding stock that never moved: I recall watching an OU TV programme in the late 70s that covered the issue of stock holding. The programme left a lasting impression. The case they used was the coal mine. One item was nails. The nails were cheap but were used in huge quantities every week. The reordering and supply was quick and simple. The result was there was no need to hold more than a week or so stock.

However a pit winding wheel cost a huge sum of money, around £120k at the time, but may not be required more than once every 18-24 months. Clearly the cost of holding was significant. However the time to order and receive a new winding wheel was in the order of 3 months and set against the loss production and profit was significantly greater.

The conclusion was that it was necessary to hold long lead time and expensive items if the consquential loss was greater.

[Kitbag]

Is there not a false premise in the accounting system? Surely having spent the capital in purchasing long lead, low usage items it is total stupidity to dispose of it because there hasn't been a use for it at the expected rate? Storage does cost, but I would suggest not as much as the rolling cannibalisation and subsequent induced faults that occur as a result of such a policy when the usage rate ramps up.
I imagine that contracts are placed as demand requires; what happens where demand is deliberately quashed, or someone somewhere thinks it best to clear the shelves to save a few quid?

[JFZ90]

The pit winding wheel example is valid; sometimes defence equipment creates similar if not worse challenges.

I'd be interested to know what USAF inventory managers are doing about e.g. F22 CIPs and PowerPC / i960s. Whilst some continual upgrade maybe planned, I suspect they are not afraid to justify why keeping stocks of components is cost effective to an extent for extended periods - vs rehosting the software every few years for example....one wonders if the NAO 'experts' even understand the issues involved, or whether they just get a new iPhone every 2 years and hence don't see why defence can't be 'the same' with no significant spares holdings....

...this is not to say there won't be some waste going on of course that should be rightly criticised if it cannot be justified...

[racedo]

NAO right on the button here and the building up of Inventory sucks money out of everybodys budgets because its got to be paid for immediately and then stored until used, if ever.

Pit winding wheel is a great example BUT not such a good one if every single Pit held one rather than having a central holding stock which equated to average replacements in a year. 400 pits having a single winding wheel at £120k each V 50 held centrally makes a huge difference.

Potentially a better way if to ensure suppliers responsible for all inventory in its holding and availability. Yup they may get a premium above normal but adding 20% to the base cost of something you need in 3 years seems a lot better than holding it for 3 years and paying for it 3 years ago and then paying to store for 3 years.

It would be unsurprising if 30% of Inventory was obsolete but political will never be there to admit that.

[Fox3WheresMyBanana]

The questions every VSO should be asking about any policy change are:

1) How will this affect the career of the proposer, given current political priorities?

2) Will the proposer be long gone by the time any major snags show up?

3) Will it be politically unacceptable to admit the mistakes, and so necessary that they be covered up?

Only afterwards should the technical details and reasoning be examined.

However, most VSOs are actually asking:

How will this affect my career..?..etc

If you apply this logic, I believe a far higher percentage of decisions 'make sense'.
Also explains the Credit Crunch, etc

Trying to reason out the policy changes by efficiency, efficacy etc is, with all due respect, missing the point. There is a need to measure current VSOs against their previous decisions, though even this doesn't pick up point (3) above; and given the PM is a PR man, there is more stuff being buried in Whitehall than Brookwood Cemetery.

[Pontius Navigator]

Pit winding wheel is a great example BUT not such a good one if every single Pit held one rather than having a central holding stock which equated to average replacements in a year.

Individual sqn stores with holdings that the sqn technical officer thought appropriate was the system in place in the 50s. It made sense when sqns may have had to be mobile, ie only attached to main bases, and the supply chain was slow - huge air force and slow communications.

The revolution in the 60s with stocks held back was more economical and stores had to return holdings to the depot. This had the unfortunate consequence that 'good' stores lost their ability to do over-the-counter deals whereas the initial training units had regular stocks for initial issue. It took time to settle down (I think :)). At one time I held all the spare nav bags out of the stores system.

[Kitbag]

racedo what you say about pit wheels would be true if there were 400 units to hold stock. In terms of ac spares you miss the point that if a supplier has been allowed to let stock holdings dwindle to 0 based on historic uses and those items take 2-3 years to manufacture that is an expensive error. More embarrassing perhaps, given the general longevity of UK ac is that sometimes the skill sets required to manufacture some items have ~ literally ~ died off.

[racedo]

racedo what you say about pit wheels would be true if there were 400 units to hold stock. In terms of ac spares you miss the point that if a supplier has been allowed to let stock holdings dwindle to 0 based on historic uses and those items take 2-3 years to manufacture that is an expensive error. More embarrassing perhaps, given the general longevity of UK ac is that sometimes the skill sets required to manufacture some items have ~ literally ~ died off.

Thats where the good old contract and service level agreements come in.

Supplier responsible for holding stock ........end of story.

Any supplier who fails to do this and is audited, the Ultimate parent company and all subsidaries disbar themselves from all future contracts.

[Pontius Navigator]

Is there not a false premise in the accounting system? Surely having spent the capital in purchasing long lead, low usage items it is total stupidity to dispose of it because there hasn't been a use for it at the expected rate?

Correct, now I wonder who introduced RAC? He is not a hundred miles from Leuchars.

I imagine that contracts are placed as demand requires; what happens where demand is deliberately quashed, or someone somewhere thinks it best to clear the shelves to save a few quid?

Not if you can help it. If you order as demand requires, ie just after just-in-time, then you are open to delay and diversion orders and additional expense. JIT should operate against SD98 rates. For instance the Nimrod used to have a large gun, the Retro. This used a number of cartridges in a plastic breech block. The number of cartridges used per shot depended on the selected speed for the shot.

Each crew was allocated a number of rounds per period. Based on the number of crews there was an annual requirement for new cartridges. Now it so happened that a Temporary Flying Order changed the setting which reduced the consumption of a particular cartridge from around 5000 pa to nil but the annual contract meant we were building up stocks but had no consumption. This could have carried on ad infinitum except for a astute CS at Harrogate that spotted what was happening and rang my up as we were the major consumer. A quick phone call and I confirmed we had a nil requirement.

No of course I hope the computers are programmed to spot sudden changes in consumption and take the appropriate action.

[tucumseh]

In terms of ac spares you miss the point that if a supplier has been allowed to let stock holdings dwindle to 0 based on historic uses and those items take 2-3 years to manufacture that is an expensive error.
Like I said above, this wasn't an error but deliberate policy promulgated by AMSO in the early 90s. Compounded by scrapping of War Reserves, which hitherto didn't count in the Max/Min levels. There was a huge increase in the number of equipments whose fit policy went from Full to Partial and Maintenance Policy to Repair by Cannibalisation. The Army, for example, were less than amused when the (admittedly quite ancient) comms kit specified for Apache had such a maintenance policy.


By the late 90s the routine paper exercises (e.g. ReGen) to check TTW capability would report high percentages of role limited aircraft, as they lacked basic equipment. The suppliers (by this time DLO, but same people) would say "Well, you haven't bought enough". The truth was the kit had been scrapped. Often, it had lain on the shelf unserviceable for too long, with no repair contracts (as the money had been wasted replacing other kit that had been scrapped). "The computer" thought it wasn't needed any more so the scrap order was given. AMSO had stopped knowledgeable human input at the same time he ordered the deliberate waste.

While the above are simple facts, you don't have to believe me. They were reported to PUS by both the Equipment Accounting Centre (1991) and MoD's own Director Internal Audit (1996). A 5 year gap, but the same RAF Chief Engineer (aka AMSO/AML). MoD's reaction to the 1996 report? "No further action" and destroyed in 2001 (info - FoI request).

The 1996 report was submitted to Lord Philip, PAC, HCDC and Ministers over the past 2 years. Which gets to the biggest problem. Given these bodies know the truth, why do they continue to protect those who are to blame, by not mentioning the report? It just encourages those who ask, as Fox 3 says;

1) How will this affect the career of the proposer, given current political priorities?

2) Will the proposer be long gone by the time any major snags show up?

3) Will it be politically unacceptable to admit the mistakes, and so necessary that they be covered up?

[Pontius Navigator]

Thats where the good old contract and service level agreements come in.

Supplier responsible for holding stock ........end of story.

That is a solution but merely shifts the cost of holding from one end of the chain to the other.

A supplier will only maintain a given stock level of widgets if he is paid to do so. He might have won a contract to maintain a stock of 1000 widgets with a requirement to replace widgets with t-time of consumption.

That contract will cost money, potentially more than holding sufficient stock in-house.

[tornadoken]

This is an easy and unfair target. Procurers are on a hiding to nothing.

Economic Order Quantity theory is in Module 101 of any logistics/purchasing course. Do not instruct the supplier to build a batch of quantity 1. Transaction expense will result in the £1,000 nut or bolt. But do not buy a life-of-type spares package...until any urge to modify the kit has lapsed. So the hapless buyer orders a couple of year's usage...and the usage rate changes, such as to zero - see Harrier/Nimrod sudden out-of-service.

Excess stock is always better than nil stock.

[tucumseh]

Procurers are on a hiding to nothing.


Correct. And its nothing to do with them anyway. It is the role of the User to quantify his requirement and make materiel / financial provision. The "procurer" is then given this information and funding.

As the Users stopped doing this in the early 90s, more often than not the M&F provision cannot be reconciled with the actual requirement. Invariably the latter is not matched by the funding. Procurers are blamed for cost overruns, but often all they have done is bought a few spares so the aircraft won't be grounded the first time there is a failure.

For example, and just to show I'm not just having a pop at RAF suppliers :E, in 1995 the RN (ASE) stated it would no longer quantify its own requirement, that MoD(PE) should do it. If PE got it wrong, then so be it. If you don't quantify, you can't cost accurately. From that day onwards, many project offices defaulted to one per aircraft, and no spares. It was the one solution that could be justified to beancounters. If they sought spares, the BCs would ask for the User statement of requirement. There wasn't one, so.....

[Pontius Navigator]

It is the role of the User to quantify his requirement and make materiel / financial provision.

. . .

As the Users stopped doing this in the early 90s, more often than not the M&F provision cannot be reconciled with the actual requirement. Invariably the latter is not matched by the funding. .

The rot probably started with staff economies in the MOD and at HQ. In the MOD whole departments were disbanded with little transfer of responsibilities. At HQ staffs were continually decimated and with both rustication and OOA detachments the staffing levels were reduced to a little more than a first fighting role. The days of station wings working on day-to-day issues with groups and groups working at a more strategic level with command and thus upward to MOD disappeared.

At 1 Gp for instance in the mid-2000s 4 layers of staff were either gapped, retired or OOA leaving just a flt lt and the AOC in one department. The capacity for forward planning practically disappeared.

[tucumseh]

The rot probably started with staff economies in the MOD and at HQ. In the MOD whole departments were disbanded with little transfer of responsibilities.

Spot on. It was the role of the HQ staff posts (civilians in my day) to state the Service requirement to MoD(PE). In 1985 I trained my successor, but he only did the job for a few months before the entire section was closed. The nearest equivalent today is Requirement Managers, but they are not trained for the job and I've never come across one who understands what his primary role (should) be. Most treat it as a (well deserved) R&R post, but if you get the basics wrong up front, the project/programme seldom recovers.

Over the years report after report to VSOs and Ministers have highlighted this but nothing is done. I wish the likes of Bernard Gray had the balls to respond to criticism from Committees by going public with these reports, all of which have been conveniently swept under the carpet. But he probably doesn't understand the level of detail himself. One of them, in 2000, set out in detail each function of the procurement cycle, described what was required of each and what the actuality was. It concluded that almost half the functions were no longer carried out, with successful projects relying almost entirely on the PM having the experience and competence to carry out multiple jobs; which they are no longer trained to do.