Defence Procurement Reform
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Defence Procurement Reform
Some interesting comments here:
House of Commons - Uncorrected Evidence - HC9-ii
One wonders if G4S were an advisor?
When fixing DE&S, what is going to be 'fixed' in Main Building? Or is the intent to make DE&S so inflexible that Main Building has to "learn"?
Love the irony here. Can you imagine the next NAO major project report "a funny thing has happened to the JSF/CVF/choose favourite project timetable".
Isn't this proposal implying that aligning DLODs can be taken as a cost saving measure?
I can't argue against the need for change, but what is the right answer? The wholesale transfer of risk & control to industry seems to create as many conflicts of interest and problems as it may (or may not) provide in terms of addressing skills issues.
House of Commons - Uncorrected Evidence - HC9-ii
Bernard Gray: Change to DE&S Organisation We are looking at two specific models within that to change from the status quo, to come to your specific question. The first is a model like the Olympic Delivery Authority, which partnered with-as it turns out-a consortium, which included a consulting engineering firm, among others, that managed the contractors that delivered the Olympic parks as a sort of joint venture between the public and private sectors. The private sector was, essentially, an adviser.
Peter Luff: I would just like to issue a public apology to DE&S staff for the constant recosting that they have had to do during the SDSR, during the three-month exercise. A lot of burdens were placed on people-sometimes, burdens that those of us in the main building did not appreciate fully in respect of what we are actually asking of the organisation behind this. I am grateful to the staff who again burnt the midnight oil long and hard to get the PR12 announcement out.
Peter Luff: If I have learnt one thing in government, it is not to give timetables that cannot be stuck to, because funny things happen to timetables. What is very important therefore is the interim structure that CDM takes.
Gray: An example might be programme boards. We have programme boards that bring together all of the lines of development that the air marshal indicated before where we supply all of the staff work. There are probably about 50 full-time equivalent people working on all of that activity. It is a useful thing to have, but the question is whether the centre wants to buy that service any more. If it does, we have to find the 50 jobs from somewhere else. Therefore, we will get into a dialogue over the summer with the centre of the Department about which of the services they want us to drop in order to manage through in the meantime.
I can't argue against the need for change, but what is the right answer? The wholesale transfer of risk & control to industry seems to create as many conflicts of interest and problems as it may (or may not) provide in terms of addressing skills issues.
Last edited by JFZ90; 15th Jul 2012 at 13:48.
I'm sure that Planning Round (PR) is to be replaced under the new Annual Budget Cycle (ABC) from the "Transforming Defence" work that has been ongoing for some time. Also the streamlining of the Capability areas to the Single Service Commands has been on the cards for some time - there was a lot of duplication of effort with MOD Capability (the old DECs), Joint Cap and also the Single Service Command Staff Officers. Therefore, if done correctly, there should be plenty of brainpower around to form the 50-strong required to support Programme Boards.
Now, if only the RAF hadn't rusticated all their Capability staff out of the HQs to Front Line Stations, we could have had a very capable "Capability Area" in Air Command
The most worrying thing about the 3-month exercise was that it was rushed, and that means mistakes were almost certainly made. The SDSR was similarly rushed and look at the number of U-turns that have been made with that (what comes to mind are: F35B, Cats N Traps, Home To Duty contributions, scrapping of ASTOR (still to play out), the wind up of the Herc K (now extended), the wind up of the Tristar (now extended), etc...). So I suspect the 3-month exercise will have some skeletons to uncover before long!
As for using the Olympics Delivery Authority model - I did have to laugh out loud at that one!
LJ
Now, if only the RAF hadn't rusticated all their Capability staff out of the HQs to Front Line Stations, we could have had a very capable "Capability Area" in Air Command
The most worrying thing about the 3-month exercise was that it was rushed, and that means mistakes were almost certainly made. The SDSR was similarly rushed and look at the number of U-turns that have been made with that (what comes to mind are: F35B, Cats N Traps, Home To Duty contributions, scrapping of ASTOR (still to play out), the wind up of the Herc K (now extended), the wind up of the Tristar (now extended), etc...). So I suspect the 3-month exercise will have some skeletons to uncover before long!
As for using the Olympics Delivery Authority model - I did have to laugh out loud at that one!
LJ
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IN FOCUS: UK outlines transformation plan for defence procurement body
Drive a harder bargain for who you have to wonder? The assumption is the harder bargain will deliver greater VFM for defence. The reality maybe that the harder bargain actually works against the redefined MoD/supplier interface.
Some people's mates might get nice jobs/rich, but the end user may not be better off. Jock appears unconvinced.
Turning around the UK's inefficient military procurement practices could be best achieved by transforming its Defence Equipment & Support (DE&S) organisation into a government-owned, contractor-operated (GOCO) entity, defence secretary Philip Hammond has announced.
A recent review conducted by Chief of Defence Materiel Bernard Gray concluded that persistent failings in the acquisition of and support for equipment used by the UK armed forces are caused by three factors, Hammond said. These are "a historically overheated equipment programme, where far more projects were planned than could be paid for; a weak interface between DE&S and the wider Ministry of Defence; and insufficient levels of business capability at DE&S for the scale and complexity of the portfolio it is asked to deliver".
Outlining his proposal for the reform of DE&S on 17 July, Hammond said: "I have decided that MoD should focus its effort on developing and testing the GOCO option further." To conclude later this year, the activity will consider "whether to launch a competition for the private sector management company to run the organisation". The strategy is being investigated in preference to an alternative model of changing the procurement and support organisation into an executive non-departmental public body.
"The MoD is now engaged in a process of transformation to deliver the behaviour-changing incentives and structures that will maintain the budget in balance in the future," Hammond said. The official earlier this year detailed a 10-year allocation fixed at £152 billion ($239 billion), plus a contingency fund of £8 billion. "The restructuring of DE&S is key to this process," he added.
Work to assess the value for money of establishing a GOCO arrangement will be performed over the next few months, before the proposal is tested against a "public sector comparator". A decision on whether to proceed would be taken in early 2014, but a full privatisation has already been ruled out as being inappropriate.
"Despite the good work of good people working for DE&S, they do not have available to them the full range of skill sets that they need to negotiate on equal terms with some of the more complex [equipment] providers," said armed forces minister Nick Harvey. "The new body will contain a greater degree of private sector expertise, so it might be able to drive a harder bargain."
One example of a recent failing was a deal to supply the Royal Navy with two Queen Elizabeth-class aircraft carriers. Originally budgeted at £3.5 billion, the deal is now expected to cost more than £5.1 billion. The coalition government had looked into the possibility of cancelling one of the ships as part of a budget balancing process, but found that the MoD's contract with the Aircraft Carrier Alliance made this financially unviable. The UK's deals linked to the Eurofighter Typhoon were also running at around £2.5 billion over budget by March 2011, according to the UK's National Audit Office (NAO).
The opposition Labour party quickly questioned the decision. "We fear that privatisation could weaken the public accountability and transparency of multibillion pound defence decision-making," said MP Alison Seabeck. "We have seen recently with G4S that outsourcing does not guarantee efficiency or effectiveness, and can increase risk," she added, referring to the high-profile failure of a decision to contract out some Olympic security commitments to a private company.
Further opposition was voiced by Steve Jary, national secretary of the Prospect union.
"Although some commercial risk would be transferred to the GOCO, operational and safety risks would remain with MoD. If the secretary of state has to carry the can for equipment failures, does he really want to contract-out the assurance that everything has been done to avoid those risks?" he asked.
Jary also questioned how the UK's allies would react to the proposed construct. "The introduction of a commercially driven DE&S creates potential conflicts of interest which will limit the extent to which secret technologies are shared," he said. "Industry is not convinced by the approach and does not understand why MoD cannot reform the procurement process from within."
Calling for wide-ranging consultation in advance of any change, former chief of the defence staff Lord Stirrup said: "I have lost count of the number of major reorganisations to which the mechanisms for defence acquisition and logistic support have been subjected over the past decade and a half. It seems unreasonable to expect superior performance from any organisation that spends almost its entire time studying its own navel."
The NAO provides a snapshot of the UK's defence procurement activities in its annual Major Projects report. In its most recent publication, covering the 2010-2011 financial year, it said the forecast cost of completing the MoD's 15 largest projects had grown by £466 million within the 12-month period, and that the total spend was likely to be a combined £6.1 billion, or 11.4% over the approved budget.
A recent review conducted by Chief of Defence Materiel Bernard Gray concluded that persistent failings in the acquisition of and support for equipment used by the UK armed forces are caused by three factors, Hammond said. These are "a historically overheated equipment programme, where far more projects were planned than could be paid for; a weak interface between DE&S and the wider Ministry of Defence; and insufficient levels of business capability at DE&S for the scale and complexity of the portfolio it is asked to deliver".
Outlining his proposal for the reform of DE&S on 17 July, Hammond said: "I have decided that MoD should focus its effort on developing and testing the GOCO option further." To conclude later this year, the activity will consider "whether to launch a competition for the private sector management company to run the organisation". The strategy is being investigated in preference to an alternative model of changing the procurement and support organisation into an executive non-departmental public body.
"The MoD is now engaged in a process of transformation to deliver the behaviour-changing incentives and structures that will maintain the budget in balance in the future," Hammond said. The official earlier this year detailed a 10-year allocation fixed at £152 billion ($239 billion), plus a contingency fund of £8 billion. "The restructuring of DE&S is key to this process," he added.
Work to assess the value for money of establishing a GOCO arrangement will be performed over the next few months, before the proposal is tested against a "public sector comparator". A decision on whether to proceed would be taken in early 2014, but a full privatisation has already been ruled out as being inappropriate.
"Despite the good work of good people working for DE&S, they do not have available to them the full range of skill sets that they need to negotiate on equal terms with some of the more complex [equipment] providers," said armed forces minister Nick Harvey. "The new body will contain a greater degree of private sector expertise, so it might be able to drive a harder bargain."
One example of a recent failing was a deal to supply the Royal Navy with two Queen Elizabeth-class aircraft carriers. Originally budgeted at £3.5 billion, the deal is now expected to cost more than £5.1 billion. The coalition government had looked into the possibility of cancelling one of the ships as part of a budget balancing process, but found that the MoD's contract with the Aircraft Carrier Alliance made this financially unviable. The UK's deals linked to the Eurofighter Typhoon were also running at around £2.5 billion over budget by March 2011, according to the UK's National Audit Office (NAO).
The opposition Labour party quickly questioned the decision. "We fear that privatisation could weaken the public accountability and transparency of multibillion pound defence decision-making," said MP Alison Seabeck. "We have seen recently with G4S that outsourcing does not guarantee efficiency or effectiveness, and can increase risk," she added, referring to the high-profile failure of a decision to contract out some Olympic security commitments to a private company.
Further opposition was voiced by Steve Jary, national secretary of the Prospect union.
"Although some commercial risk would be transferred to the GOCO, operational and safety risks would remain with MoD. If the secretary of state has to carry the can for equipment failures, does he really want to contract-out the assurance that everything has been done to avoid those risks?" he asked.
Jary also questioned how the UK's allies would react to the proposed construct. "The introduction of a commercially driven DE&S creates potential conflicts of interest which will limit the extent to which secret technologies are shared," he said. "Industry is not convinced by the approach and does not understand why MoD cannot reform the procurement process from within."
Calling for wide-ranging consultation in advance of any change, former chief of the defence staff Lord Stirrup said: "I have lost count of the number of major reorganisations to which the mechanisms for defence acquisition and logistic support have been subjected over the past decade and a half. It seems unreasonable to expect superior performance from any organisation that spends almost its entire time studying its own navel."
The NAO provides a snapshot of the UK's defence procurement activities in its annual Major Projects report. In its most recent publication, covering the 2010-2011 financial year, it said the forecast cost of completing the MoD's 15 largest projects had grown by £466 million within the 12-month period, and that the total spend was likely to be a combined £6.1 billion, or 11.4% over the approved budget.
Some people's mates might get nice jobs/rich, but the end user may not be better off. Jock appears unconvinced.
Last edited by JFZ90; 20th Jul 2012 at 01:13.
In engineering speak, this is just about realigning control boundaries.
But the problem, witness the QinetiQ/DSTL split, is that both sides of the boundary will want to retain staff to "shadow" the other. It becomes a double whammy because, again witness QQ, the "CO" part of the organisation has more work to do, which means more of the finite Defence Budget is spent on profits.
For example, when Boscombe Down and, especially, Malvern and Fort Halstead, became part of QQ, their costs doubled overnight with (surprise), a new scrutiny regime that meant double the signatures necessary to sign off anything within QQ. Whole new layers of management appeared overnight, comprising people who had no vested interest in meeting MoD's Time, Cost or Performance targets, only their own. The immediate effect was scramble by IPTs to salami slice existing programmes, as funds had to be generated to pay for indirect labour.
It may seem cynical, but the maneuvering will have already started within MoD for top positions in this new "CO" part (given the decision was quietly made some time ago and only announced the other day). Again, witness the instant millionaires when relatively low grade Civil Servants found themselves in QQ.
I think Bernard Gray has allowed himself to be pushed down a certain route by those who saw this opportunity. Yet another restructuring based on the premise that all procurement is inefficient. He's refused to learn from the successes, and his senior staffs in MoD/DE&S have a vested interest in not revealing how east it is to achieve such successes, if you have the right people and they follow the regulations.
But the problem, witness the QinetiQ/DSTL split, is that both sides of the boundary will want to retain staff to "shadow" the other. It becomes a double whammy because, again witness QQ, the "CO" part of the organisation has more work to do, which means more of the finite Defence Budget is spent on profits.
For example, when Boscombe Down and, especially, Malvern and Fort Halstead, became part of QQ, their costs doubled overnight with (surprise), a new scrutiny regime that meant double the signatures necessary to sign off anything within QQ. Whole new layers of management appeared overnight, comprising people who had no vested interest in meeting MoD's Time, Cost or Performance targets, only their own. The immediate effect was scramble by IPTs to salami slice existing programmes, as funds had to be generated to pay for indirect labour.
It may seem cynical, but the maneuvering will have already started within MoD for top positions in this new "CO" part (given the decision was quietly made some time ago and only announced the other day). Again, witness the instant millionaires when relatively low grade Civil Servants found themselves in QQ.
I think Bernard Gray has allowed himself to be pushed down a certain route by those who saw this opportunity. Yet another restructuring based on the premise that all procurement is inefficient. He's refused to learn from the successes, and his senior staffs in MoD/DE&S have a vested interest in not revealing how east it is to achieve such successes, if you have the right people and they follow the regulations.
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The most worrying thing about the 3-month exercise was that it was rushed
Don't make the mistake of confusing a resource-driven defence review (SDSR) with a policy-led defence review (SDR) - irrespective of what the politicians say. Most post-WWII defence refiews have been the former; the highly-praised but ultimately unfunded Noo-Labour SDR is an exception and, in any case led to the MOD having an appetite for things (including wars in Iraq and Afghanistan) that HMT simply wouldn't pay for - and the financial imposition of a massive reduction in military ambition was what made SDSR so painful.
C130K OSD was not brought forward by SDSR and so its recent extension has nothing to do with SDSR being rushed.
TriStar extension was caused by delays to Voyager - SDSR just took an optimistic view that the rather expensive FSTA PFI might deliver on time.
ASTOR/Sentinel will only survive beyond 2015 if someone finds the money from elsewhere in the RAF - that is the problem with being broke, you have to make unpleasant decisions. If you don't then stick with those decision then you end up in the same financial loony bin that you were previously a resident of.
I do agree with many of the views on SDSR. However, I think that there was massive naivety in the armed forces about what was coming around the corner at us in 2010, irrespective of who won the election. Thinking that we are suddenly going to get a bunch of extra money in future is equally as naive.
I also agree with the sentiments on turning civil servants into businessmen when DERA was split and it has taken/is taking QQ a long time to strip out some of the bureaucracy. If DPA work was transferred to the private sector then my concern would be not that industry couldn't deliver a more streamlined set of processes but that (a) some of the less capable employees of DPA would be taken on by industry because they couldn't get a job elsewhere and appeared to know what they were talking about but their 'skills' end up costing more and (b) the burden of excessive scrutiny would remain but become more costly to implement.
Last edited by hello1; 21st Jul 2012 at 09:05.
