Fox to crack down on military overspends
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It is difficult to see how the carriers will ever get finished on time (if ever) in these circumstances. The government acknowledged that they were only saved from the axe because it was cheaper to continue than to stop - but that depended on them staying on budget. I can't see the government being too willing to step in when the costs start to overrun.
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But of course, if we do pull put of Afgan, that 'ageing Sea King' fleet will be the only 'front line' asset we have, as the SAR force has been continuously for the last 70 years and the Sea King for a healthy number of those. Would be a travesty for another type to go out of service though!!
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Such a complex issue and how to sum it up in a few paragraphs. Having spent years in requirements and test I don't have the answer.
I had one project that was well defined (both requirement and spec) and small enough to be able to be developed on time on cost. On delivery it worked. It had issues but basically it was sound. It was a National programme.
Now take Typhoon. The aircraft was designed as an air to air aircraft with a ground attack secondary capability, although UK was the only country pushing for that secondary capability from the early days. The ISD when I joined the project was 1996 with one approved slip of up to 2 years. It was to use state of the art technology - in other words off the shelf - and the company would write the specs and development would be "hands off" to avoid requirement creep. Throw in politics; the Germans delayed their requiremnts by years, add the usual development problems such as flying control software that didn't work and we see an actual ISD of 2005. Remember that at one time it was called Eurofighter 2000? Add to that orders from the nations that are then trimmed back pushing up the unit cost because of a smaller buy.
You can't keep hundreds of companies active over a 9 year delay and expect to come in on cost. Such a delay also builds in obsolescence both in components and requirement. There was a minor change in circumstances during that period as "The Wall" fell. How can such events be ignored during an aquisition and expect still to have a platform that meets the operational need?
Until we have punitive payments for delays and built in "mid development upgrades" to keep the design relevant and viable, we won't make progress. We also need a contracts branch who write tight contracts that the company can't just ignore.
That said, fixed price contracts do not work. Unforseen problems in a complex development are inevitable. Fixed price means that either the cost is renegotiated or the additional expense is camouflaged. Companies will always protect their profit so if the price stays the same, corners are cut elsewhere. In my experience that was things like operational testing so the "short cuts" remain undetected for longer and the effectiveness suffers. To solve this some form of closely monitored fixed price plus system is needed with a contingency built in to the contract funding.
I could go on for hours but still not come up with a solution. That said, I'm sure the Governments aim is not to deliver more effective equipment, rather to save money, Cheap, invariably, is not effective.
I had one project that was well defined (both requirement and spec) and small enough to be able to be developed on time on cost. On delivery it worked. It had issues but basically it was sound. It was a National programme.
Now take Typhoon. The aircraft was designed as an air to air aircraft with a ground attack secondary capability, although UK was the only country pushing for that secondary capability from the early days. The ISD when I joined the project was 1996 with one approved slip of up to 2 years. It was to use state of the art technology - in other words off the shelf - and the company would write the specs and development would be "hands off" to avoid requirement creep. Throw in politics; the Germans delayed their requiremnts by years, add the usual development problems such as flying control software that didn't work and we see an actual ISD of 2005. Remember that at one time it was called Eurofighter 2000? Add to that orders from the nations that are then trimmed back pushing up the unit cost because of a smaller buy.
You can't keep hundreds of companies active over a 9 year delay and expect to come in on cost. Such a delay also builds in obsolescence both in components and requirement. There was a minor change in circumstances during that period as "The Wall" fell. How can such events be ignored during an aquisition and expect still to have a platform that meets the operational need?
Until we have punitive payments for delays and built in "mid development upgrades" to keep the design relevant and viable, we won't make progress. We also need a contracts branch who write tight contracts that the company can't just ignore.
That said, fixed price contracts do not work. Unforseen problems in a complex development are inevitable. Fixed price means that either the cost is renegotiated or the additional expense is camouflaged. Companies will always protect their profit so if the price stays the same, corners are cut elsewhere. In my experience that was things like operational testing so the "short cuts" remain undetected for longer and the effectiveness suffers. To solve this some form of closely monitored fixed price plus system is needed with a contingency built in to the contract funding.
I could go on for hours but still not come up with a solution. That said, I'm sure the Governments aim is not to deliver more effective equipment, rather to save money, Cheap, invariably, is not effective.
Last edited by Geehovah; 21st Feb 2011 at 17:57.
Just a few comments;
Fox (actually, Bernard Gray, judging by some of the language);
Here are three ideas. 1. Dig out the mandated “Permanent LTC Instructions”, unused by most since 1987 but never rescinded. (My dog-eared copy never left my side while at work). 2. Recruit people junior enough to implement them. (As no-one in DE&S is). 3. Implement them. Doesn’t solve every problem, but it avoids most of the recurring ones you come across. That is, it is the first step in Risk Management – avoid the avoidable, manage the unavoidable. And future Project Officers, Project Managers and Programme Managers will learn the basics.
Geehovah
Old saying; Firm is Fixed, Fixed is variable. Fixed Price and Cost Plus contracts still have their place; the trick is having the experience and competence to know which works in any given situation. MoD no longer requires those attributes, and hasn’t since about 1990.
Remember “Contract Branch Tolerance”? Allowed a 20% variation in price before resubmission was required. That sounds a lot, but typically 17.5% would be taken up because OR (DEC) forgot to include VAT! Something that didn’t happen when Scrutiny was conducted properly (as above).
Ah, Requirement Scrutiny, mandated by PUS (the Chief Accounting officer) and designed to ensure that a proposed spend is both proper and fair and reasonable based on the actual requirement; not necessarily what is in the proposal/SRD/submission/business case etc. Not conducted properly since 1992, when it was deemed an offence to do so. Upheld by CDP in 1998 and successive Ministers every year since. Rescind that one and take a huge step forward in getting the requirement and cost right.
And it is that true statement that illustrates the link to Haddon-Cave (which everyone has heard of) and the previous, much more detailed and damning reports which make H-C look like a 5 year old having a strop (and which MoD don’t want you to know about).
Fox (actually, Bernard Gray, judging by some of the language);
He will say: “For years successive Defence Secretaries have failed to get a grip on the equipment programme and failed to hold the department and industry to account for delays and poor cost-estimation.”
He will criticise what he calls a “conspiracy of optimism based on poor cost-estimation, unrealistic timescales” at the MoD and in industry.
“These practices in the MOD would simply not be tolerated in the private sector, and they will no longer be tolerated in the MoD.”
He will criticise what he calls a “conspiracy of optimism based on poor cost-estimation, unrealistic timescales” at the MoD and in industry.
“These practices in the MOD would simply not be tolerated in the private sector, and they will no longer be tolerated in the MoD.”
Here are three ideas. 1. Dig out the mandated “Permanent LTC Instructions”, unused by most since 1987 but never rescinded. (My dog-eared copy never left my side while at work). 2. Recruit people junior enough to implement them. (As no-one in DE&S is). 3. Implement them. Doesn’t solve every problem, but it avoids most of the recurring ones you come across. That is, it is the first step in Risk Management – avoid the avoidable, manage the unavoidable. And future Project Officers, Project Managers and Programme Managers will learn the basics.
Geehovah
That said, fixed price contracts do not work.
To solve this some form of closely monitored fixed price plus system is needed with a contingency built in to the contract funding.
Remember “Contract Branch Tolerance”? Allowed a 20% variation in price before resubmission was required. That sounds a lot, but typically 17.5% would be taken up because OR (DEC) forgot to include VAT! Something that didn’t happen when Scrutiny was conducted properly (as above).
Ah, Requirement Scrutiny, mandated by PUS (the Chief Accounting officer) and designed to ensure that a proposed spend is both proper and fair and reasonable based on the actual requirement; not necessarily what is in the proposal/SRD/submission/business case etc. Not conducted properly since 1992, when it was deemed an offence to do so. Upheld by CDP in 1998 and successive Ministers every year since. Rescind that one and take a huge step forward in getting the requirement and cost right.
In my experience that was things like operational testing so the "short cuts" remain undetected for longer and the effectiveness (and safety) suffers.
And it is that true statement that illustrates the link to Haddon-Cave (which everyone has heard of) and the previous, much more detailed and damning reports which make H-C look like a 5 year old having a strop (and which MoD don’t want you to know about).
Haven't we heard something like this before? Geehovah sums up the problems nicely and I can concur with what he says having worked in the Main Building for 2 years. My impression was of good will on all sides - but problems do crop up and requirements do change. That's life. It's especially problematic in international programmes. Cost escalation in inevitable unles we buy off the shelf aircraft with standard kit. The risks of that course are enormous.
In my experience, requirement creep is one thing, but the random reprofiling caused by budget inflexibility across years every PR is the other major one. If you read the NAO report, pretty much all of QEC variance from MG approval is down to schedule change and associated assumptions rather than requirements creep.
Fix that and you go a long way (by no means all) towards fixing the problem.
Fix that and you go a long way (by no means all) towards fixing the problem.
Good Lord, nine well thought out, considered posts giving insight to the question before someone reduces it to the usual Pprune 'proud to appear thick' level of debate. This is far too informative, please desist!
Yours,
Disgusted of Hampshire
Yours,
Disgusted of Hampshire
And of course not helped by the fact that HMT will only allow the recognised rate of inflation to be factored into the the Planning Rounds, despite the fact that "defence inflation" often runs at 3 or 4 times the HMT recognise rate. In general a programme has no chance of meeting its budget, particularly if it takes a long time to procure or is large and complex. I am surprised that Sec Def didn't know that.
In my experience, requirement creep is one thing, but the random reprofiling caused by budget inflexibility across years every PR is the other major one. If you read the NAO report, pretty much all of QEC variance from MG approval is down to schedule change and associated assumptions rather than requirements creep.
Fix that and you go a long way (by no means all) towards fixing the problem.
Fix that and you go a long way (by no means all) towards fixing the problem.
Factor 1
Project A runs late/overbudget and underspends some years and forecasts to overspend others.
This means the schedule for Projects B, C and D have to be rephased to accommodate the problems of Project A. This increases the cost of B, C and D.
Now that B, C and D have changed and are ove-budget, this rippled through onto E, F and G.
Result : MOD buries head in sand and carries on overspending.
Solution : Do not be late on Project A (obvious, radical and unlikely)
Factor 2
MoD asks for an apple and get a price. Offer is accepted and supplier plants orchard.
MOD asks for progress reports and gets them. All is well.
MOD asks for more technical detail to integrate the apples with the cider press.
Contractor provides data on Granny Smiths apples and the MOD realises that they make rubbish cider.
MOD asks for a contract change to Cox's pippins after realising that the contractor has provided a fruit compliant to the spec.
Contractor will deliver 12 months later than originally planned, but is not late.
MOD renegotiate with the press supplier, the bottle supplier and staff and find that they are going to lose money, as everyones prices are now higher for later deliveries.
Result : MOD buries head in sand and carries on overspending.
Solution : Write down what you want and then stick to it. Learn to like Granny Smith cider as you may never actually get any cider after all.
MoD asks for an apple and get a price. Offer is accepted and supplier plants orchard.
MOD asks for progress reports and gets them. All is well.
MOD asks for progress reports and gets them. All is well.
Excellent. Or, to cite an actual project from 2006.
1. MoD asks for an apple to be grown to a certain spec.
2. Bidder A says “We have an actual apple, to a better spec (sweeter tasting, stays ripe longer, bigger, cheaper). We can’t grow to your spec because it is so outdated we’ve thrown away all the seeds”.
3. Bidder B says “We haven’t a scoobie but we’ll plant a seed and see what happens. Come back in 3 years and our Director (a Junior Defence Minister) will give you a report”.
4. MoD awards contract to Bidder B who give up the ghost after 2 years.
5. Troops die from starvation.
6. F***wit promoted. Teaches all junior staff that above is best practice.
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As project is never allowed close to fermentation, troops adapt to new target of delivery of apple juice rather than cider. Troops purchase own yeast and produce viable cider in the roof void of their accommodation. Little quality control of cider leads to several accidents over several years. Senior officers ignore local cider-related incidents, maintaining apple juice was and is being delivered on time and on cost, ignoring all evidence of local modification of the product. Eventually, an eminent QC is called in and produces a 600 page investigation into the culture of scrumpy in the Armed Forces. Much wringing of hands, pressing of apples, orchards are razed to the ground and Boulmers are accused of profiteering. Perry is viewed as a possible alternative.
We begin again.
We begin again.
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Another example from the late 80s. I can talk about it because aircraft deployed are protected effectively so no one is at risk from my comments.
A piece of "state of the art" electronic equipment is developed to protect aircraft A. Development dribbles on for many years and by the time it's ready to be fitted and tested it's apparent that the threats it was designed to counter are obsolescent. It's too late to change the spec (contractually) and something is better than nothing so it's fitted to aircraft A. Plans to fit the system to aircraft B (funded) are reviwed and it's concluded that a similar system being developed for aircraft C would give better protection and could be fitted reasonably easily. Plans are offered to use the funds to switch to the more modern system, albeit at additional cost. The scrutineers see the review as a sign of weakness and the funds are withdrawn so aircraft B remains unprotected. The capability is "taken at risk".
Move on to the "naughties". Aicraft A deploys to a nasty place where an enemy is shooting at us. Operators point out that the system isn't very good as most of the threats it was specified against have gone away. A podded off the shelf solution is cobbled together and fitted. Luckily our friends across the Pond still have systems on the shelf! The threat to aircraft B has not gone away and when it becomes apparent that it is also about to go in harms way, it finally gets a podded off the shelf system many years after the funding had been pulled. Staff rush around finding cash, fitting stuff as quickly as possible and working out how to support the equipment in service.
Ironically, the updated system for aircraft C is delayed into service by 15 years and, not surprisingly, the threats it was designed to counter are obsolescent. Moreover, the technology the contractor chose, against the wishes of the customer, doesn't work as well as it should. The capability is taken at risk as the aircraft is not deployed.
If aircraft A and aircraft B both needed a podded off the shelf system when in harms way, what's the betting that aircraft C will also need one when it deploys? I'd also bet money that in the current climate, the piece of equipment currently fitted will not be updated. Do you think William Hill would take that bet on. If so, I could make money.
It couldn't happen could it? Truth can be stranger than fiction.
Defence is a chess match not a business. There are no accolades for coming second and enemies don't respect "best practice". To win the match we need to be responsive not procedural. If the budget is fixed we need to buy less but smarter. Does that ring a bell. Best we start doing it rather than writing about it.
A piece of "state of the art" electronic equipment is developed to protect aircraft A. Development dribbles on for many years and by the time it's ready to be fitted and tested it's apparent that the threats it was designed to counter are obsolescent. It's too late to change the spec (contractually) and something is better than nothing so it's fitted to aircraft A. Plans to fit the system to aircraft B (funded) are reviwed and it's concluded that a similar system being developed for aircraft C would give better protection and could be fitted reasonably easily. Plans are offered to use the funds to switch to the more modern system, albeit at additional cost. The scrutineers see the review as a sign of weakness and the funds are withdrawn so aircraft B remains unprotected. The capability is "taken at risk".
Move on to the "naughties". Aicraft A deploys to a nasty place where an enemy is shooting at us. Operators point out that the system isn't very good as most of the threats it was specified against have gone away. A podded off the shelf solution is cobbled together and fitted. Luckily our friends across the Pond still have systems on the shelf! The threat to aircraft B has not gone away and when it becomes apparent that it is also about to go in harms way, it finally gets a podded off the shelf system many years after the funding had been pulled. Staff rush around finding cash, fitting stuff as quickly as possible and working out how to support the equipment in service.
Ironically, the updated system for aircraft C is delayed into service by 15 years and, not surprisingly, the threats it was designed to counter are obsolescent. Moreover, the technology the contractor chose, against the wishes of the customer, doesn't work as well as it should. The capability is taken at risk as the aircraft is not deployed.
If aircraft A and aircraft B both needed a podded off the shelf system when in harms way, what's the betting that aircraft C will also need one when it deploys? I'd also bet money that in the current climate, the piece of equipment currently fitted will not be updated. Do you think William Hill would take that bet on. If so, I could make money.
It couldn't happen could it? Truth can be stranger than fiction.
Defence is a chess match not a business. There are no accolades for coming second and enemies don't respect "best practice". To win the match we need to be responsive not procedural. If the budget is fixed we need to buy less but smarter. Does that ring a bell. Best we start doing it rather than writing about it.
Last edited by Geehovah; 22nd Feb 2011 at 06:48.