Public Accounts Committee roasts MoD.. again
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Public Accounts Committee roasts MoD.. again
https://publications.parliament.uk/p.../880/88002.htmConclusions and recommendations
1.The Department faces a significant affordability gap in its Equipment Plan for the next 10 years, but is unable to determine the size of the gap, thereby reducing its ability to make informed decisions about our national defence. There is an affordability gap of at least £4.9 billion in the Plan, rising to a potential £20.8 billion if all identified financial risks materialise and no savings assumed in the Plan are achieved. Financial risk has increased since last year, and while the Department acknowledges that the affordability gap is in the billions of pounds, it is unable to quantify the size of the gap with any degree of precision.
We are concerned by the Department’s vagueness and reluctance to acknowledge its full exposure, and by the Department seeming to question the accuracy of its own numbers when giving evidence. The Department says it is confident that at end of the Modernising Defence Programme, with cost information anticipated in autumn 2018, it will have a “strategically affordable” Plan, but is unable to articulate clearly how this will be achieved. Recommendation: The Department has committed to emerging conclusions from the Modernising Defence Programme (MDP) by early summer. The Department must report those conclusions within three months, including its assessment on timescale for concluding the MDP. At the conclusion of the Programme the Department must be able to show that it has established an affordable programme and a balanced equipment budget, and commit to reporting those results to Parliament at the earliest opportunity
.2.The Department’s current approach to planning for equipment does not reflect the continually changing nature of the defence landscape, reducing its ability to be well placed to deliver the future defence capability needed. There are now a number of emerging threats, such as cyber and artificial intelligence, leading to changes in the nature of the defence landscape. However, there is a lack of flexibility in the 10-year Plan, which contains no headroom or unallocated contingency, with spending dominated by a number of large platforms which take years to build. Increasingly, the UK’s military response is dependant on strong international alliances. The Department is leading the Modernising Defence Programme in response to these changing threats and this could result in some big changes in the Equipment Plan if the Department introduces new projects and de-scopes, defers or cancels others to balance the budget. When completing and implementing the Modernising Defence Programme, the Department faces the challenge of balancing the need to optimise operational capability with both value for money and the need to support UK industry. There is a need for a strong UK defence industry to underpin our ability to react to emerging threats. Recommendation: The Department’s Modernising Defence Programme and its future Equipment Plans should set out how it will balance the need to develop long term capability with the challenges of maintaining sufficient flexibility to respond to changes in the defence landscape.
3.The Department’s Equipment Plan is characterised by significant cost optimism bias arising from weaknesses in the Department’s cost management. The Department’s failure to balance its 2017 Equipment Plan budget arises from a lack of control of the Commands by the centre, which resulted in £9.6 billion of forecast costs being excluded from the Plan. The Department lacks an understanding of what comprises that £9.6 billion, and could provide no meaningful explanation for excluding the costs of buying Type 31e frigates. The Department also needs to be clear about what contingency it is relying on. Recommendation: The Department needs to improve its management of the Plan to ensure that the next Plan is comprehensive, has much greater clarity around costs and spending, and all elements are realistically and fully costed
.4.The biggest risk to the Equipment Plan is the cost of the nuclear programme. The costings of the nuclear enterprise in the Plan have continued to grow. The Department says that a recent review indicates that costs for the Dreadnought submarine need to be brought forward, which will further increase short term pressures in the Plan. In addition, the costs of the warhead programme have also increased. Witnesses said their biggest worry is the costing of the nuclear programme. This is a long-term programme which can experience big cost changes throughout its life cycle. Recommendation: The Department needs to improve its control of the costs of its nuclear projects and to report more transparently, including reporting the impact of cost increases and the interdependencies of projects
.5.The Department is not sufficiently open with Parliament to allow us and the taxpayer to have a clear view of its finances. We expect to have timely, accurate and full information on the commitments and costs into which the Department enters. This year’s Equipment Plan was not published until 10 months after the start of the Plan period. It provides very little information about the many risks to affordability and the significant dependence of the Plan on assumed, and optimistic, savings targets being achieved. Beyond the Equipment Plan there is a wider transparency gap, highlighted particularly by the lack of cost information available on F-35 Lightning fighter aircraft. When challenged, the Department undertook to include more information on its equipment and wider budget in its Annual Report and Accounts, to bring forward their reporting of the Equipment Plan to early autumn, and also undertook to report on the Modernising Defence Programme cost implications in the autumn. Recommendation: The Department should write back in three months committing to the specific improvements it will make in providing information to Parliament, including how it will provide regular and informative updates on the cost and progress of the F-35s. The Department should consider an annual summary to Parliament
.6.The Department continues to be reliant on ever increasing and optimistic savings targets. A total requirement for £16 billion of savings has been set since the Equipment Plan reporting regime began in 2012. The Department claims that it has achieved £7.9 billion so far, but given the extent of the challenge and its patchy past performance, we remain sceptical that it can achieve the remaining £8.1 billion by 2027. The majority of the remaining savings ideas are at an early stage of development, with implementation plans still to be developed. The Committee will expect to see clear evidence of that more rigorous approach and to be informed swiftly if savings targets are not achieved. Recommendation: The Department should ensure that its savings targets are realistic, and introduce transparent reporting of progress against all targets in future Equipment Plans. This should include reporting of progress against cost reductions for F-35B aircraft, including sustainment costs.
1.The Department faces a significant affordability gap in its Equipment Plan for the next 10 years, but is unable to determine the size of the gap, thereby reducing its ability to make informed decisions about our national defence. There is an affordability gap of at least £4.9 billion in the Plan, rising to a potential £20.8 billion if all identified financial risks materialise and no savings assumed in the Plan are achieved. Financial risk has increased since last year, and while the Department acknowledges that the affordability gap is in the billions of pounds, it is unable to quantify the size of the gap with any degree of precision.
We are concerned by the Department’s vagueness and reluctance to acknowledge its full exposure, and by the Department seeming to question the accuracy of its own numbers when giving evidence. The Department says it is confident that at end of the Modernising Defence Programme, with cost information anticipated in autumn 2018, it will have a “strategically affordable” Plan, but is unable to articulate clearly how this will be achieved. Recommendation: The Department has committed to emerging conclusions from the Modernising Defence Programme (MDP) by early summer. The Department must report those conclusions within three months, including its assessment on timescale for concluding the MDP. At the conclusion of the Programme the Department must be able to show that it has established an affordable programme and a balanced equipment budget, and commit to reporting those results to Parliament at the earliest opportunity
.2.The Department’s current approach to planning for equipment does not reflect the continually changing nature of the defence landscape, reducing its ability to be well placed to deliver the future defence capability needed. There are now a number of emerging threats, such as cyber and artificial intelligence, leading to changes in the nature of the defence landscape. However, there is a lack of flexibility in the 10-year Plan, which contains no headroom or unallocated contingency, with spending dominated by a number of large platforms which take years to build. Increasingly, the UK’s military response is dependant on strong international alliances. The Department is leading the Modernising Defence Programme in response to these changing threats and this could result in some big changes in the Equipment Plan if the Department introduces new projects and de-scopes, defers or cancels others to balance the budget. When completing and implementing the Modernising Defence Programme, the Department faces the challenge of balancing the need to optimise operational capability with both value for money and the need to support UK industry. There is a need for a strong UK defence industry to underpin our ability to react to emerging threats. Recommendation: The Department’s Modernising Defence Programme and its future Equipment Plans should set out how it will balance the need to develop long term capability with the challenges of maintaining sufficient flexibility to respond to changes in the defence landscape.
3.The Department’s Equipment Plan is characterised by significant cost optimism bias arising from weaknesses in the Department’s cost management. The Department’s failure to balance its 2017 Equipment Plan budget arises from a lack of control of the Commands by the centre, which resulted in £9.6 billion of forecast costs being excluded from the Plan. The Department lacks an understanding of what comprises that £9.6 billion, and could provide no meaningful explanation for excluding the costs of buying Type 31e frigates. The Department also needs to be clear about what contingency it is relying on. Recommendation: The Department needs to improve its management of the Plan to ensure that the next Plan is comprehensive, has much greater clarity around costs and spending, and all elements are realistically and fully costed
.4.The biggest risk to the Equipment Plan is the cost of the nuclear programme. The costings of the nuclear enterprise in the Plan have continued to grow. The Department says that a recent review indicates that costs for the Dreadnought submarine need to be brought forward, which will further increase short term pressures in the Plan. In addition, the costs of the warhead programme have also increased. Witnesses said their biggest worry is the costing of the nuclear programme. This is a long-term programme which can experience big cost changes throughout its life cycle. Recommendation: The Department needs to improve its control of the costs of its nuclear projects and to report more transparently, including reporting the impact of cost increases and the interdependencies of projects
.5.The Department is not sufficiently open with Parliament to allow us and the taxpayer to have a clear view of its finances. We expect to have timely, accurate and full information on the commitments and costs into which the Department enters. This year’s Equipment Plan was not published until 10 months after the start of the Plan period. It provides very little information about the many risks to affordability and the significant dependence of the Plan on assumed, and optimistic, savings targets being achieved. Beyond the Equipment Plan there is a wider transparency gap, highlighted particularly by the lack of cost information available on F-35 Lightning fighter aircraft. When challenged, the Department undertook to include more information on its equipment and wider budget in its Annual Report and Accounts, to bring forward their reporting of the Equipment Plan to early autumn, and also undertook to report on the Modernising Defence Programme cost implications in the autumn. Recommendation: The Department should write back in three months committing to the specific improvements it will make in providing information to Parliament, including how it will provide regular and informative updates on the cost and progress of the F-35s. The Department should consider an annual summary to Parliament
.6.The Department continues to be reliant on ever increasing and optimistic savings targets. A total requirement for £16 billion of savings has been set since the Equipment Plan reporting regime began in 2012. The Department claims that it has achieved £7.9 billion so far, but given the extent of the challenge and its patchy past performance, we remain sceptical that it can achieve the remaining £8.1 billion by 2027. The majority of the remaining savings ideas are at an early stage of development, with implementation plans still to be developed. The Committee will expect to see clear evidence of that more rigorous approach and to be informed swiftly if savings targets are not achieved. Recommendation: The Department should ensure that its savings targets are realistic, and introduce transparent reporting of progress against all targets in future Equipment Plans. This should include reporting of progress against cost reductions for F-35B aircraft, including sustainment costs.
And the band plays on.....
The recommendations are almost as ludicrous as the issues they are designed to address. Must try harder, must improve, must be more realistic, etc etc. How long before the Public Accounts Committee actually says or does something which will make a difference? This has all the hallmarks of faceless people from MoD going through the motions, offering up some information, then curling up in a ball to be verbally toasted, then carrying on as before. Plus ca change....
We already have a well established pantomime season, and the cost is extremely reasonable compared with this one!
The recommendations are almost as ludicrous as the issues they are designed to address. Must try harder, must improve, must be more realistic, etc etc. How long before the Public Accounts Committee actually says or does something which will make a difference? This has all the hallmarks of faceless people from MoD going through the motions, offering up some information, then curling up in a ball to be verbally toasted, then carrying on as before. Plus ca change....
We already have a well established pantomime season, and the cost is extremely reasonable compared with this one!
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I think the real issue is that the MoD has very little "control" over spending in the sense someone like Nissan or say Marks & Spencer have. They are tied into long term programmes that are managed by the contractors and if the costs overrun they only really find out when the bill (weekly/monthly/yearly) comes in - and it has to be paid whatever
The dependence of "savings" is really a measure of how much the predicted costs exceed the funds available TBH
The only answer is more money or fewer major programmes
The dependence of "savings" is really a measure of how much the predicted costs exceed the funds available TBH
The only answer is more money or fewer major programmes
I cannot resist a wry smile. In 1990 Wyton was the first "budget" station, and as an almost qualified CIMA accountant I was posted in as OC Admin, together with a Budget Manager. With a staish keen on improving the lot of the chaps and chappesses, we used the budget to everyone's advantage, including the rise in value of fuel funding long overdue married quarter improvements, which did not please the AOC (a hidden bonus).The idea was that budgeting and budget management would eventually work its way across the whole MOD landscape. Seems like nearly 30 years on nothing has improved.
BTW, did the PAC get onto the debacle that is Air cadet gliding.... maybe not....yet
BTW, did the PAC get onto the debacle that is Air cadet gliding.... maybe not....yet
HH,
It is thinking like that which has brought us to the current debacle. The days of surrendering the cheque book to the contractors, dropping your trousers and bending over were supposed to have ended some years ago. A significant proportion of the overruns are usually attributable to changes to the specification, which is totally down to the customer. And contracts dont have to be open ended / "cost plus". Look at the losses Boeing has to eat from time to time....
As for fewer major programmes, I find that hard to imagine given how few there are already. They could probably be counted on one hand, and yet according to the PAC, MoD forgot to include the type 31e frigates. Incredible.
Whilst I would be reluctant to take any comparison with Nissan or M&S too far, heads would have rolled in these organisations for incompetence at a much lower level than this.
It is thinking like that which has brought us to the current debacle. The days of surrendering the cheque book to the contractors, dropping your trousers and bending over were supposed to have ended some years ago. A significant proportion of the overruns are usually attributable to changes to the specification, which is totally down to the customer. And contracts dont have to be open ended / "cost plus". Look at the losses Boeing has to eat from time to time....
As for fewer major programmes, I find that hard to imagine given how few there are already. They could probably be counted on one hand, and yet according to the PAC, MoD forgot to include the type 31e frigates. Incredible.
Whilst I would be reluctant to take any comparison with Nissan or M&S too far, heads would have rolled in these organisations for incompetence at a much lower level than this.
I am firmly of the opinion that to cost a programme, the customer must first state his requirement and quantify it. This has not been Service policy since January 1988; at which point MoD(PE) was told to DIY. Nothing had changed by the time I retired. Unless the PE/DPA/DLO/DE&S project office had someone who'd done that job in the Service HQ (and in aviation we're talking about a slack handful of people per Service), then everything was a honking great wet finger. First things first.
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" MoD forgot to include the type 31e frigates. Incredible. "
It might suggest they aren't going to happen????????????????
I take your point about the need to manage the contractors but it's a b****** of a job in any industry - especially when they pay a lot more than the client organisation - think what it takes to manage something like this for example.......... The Shell "Prelude" Floating Liquid Gas facility offshore Oz
http://www.bbc.co.uk/news/science-en...iness-44003521
It might suggest they aren't going to happen????????????????
I take your point about the need to manage the contractors but it's a b****** of a job in any industry - especially when they pay a lot more than the client organisation - think what it takes to manage something like this for example.......... The Shell "Prelude" Floating Liquid Gas facility offshore Oz
http://www.bbc.co.uk/news/science-en...iness-44003521
The Shell "Prelude" Floating Liquid Gas facility offshore Oz
http://www.bbc.co.uk/news/science-en...iness-44003521
http://www.bbc.co.uk/news/science-en...iness-44003521
Your two links above seem to have got stuck together, so I've split them for other readers.
http://www.bbc.co.uk/news/science-environment-30394137
http://www.bbc.co.uk/news/business-44003521
Last edited by BossEyed; 11th May 2018 at 12:08. Reason: Typo
As ever, it is usually best to read the evidence transcripts before believing the hype.
Oral evidence - Defence Equipment Plan 2017-27 - 14 Mar 2018
While it is clear that PUS, DFin and DCDS(Cap) are all unhappy with the level of financial risk being carried, when one actually reads the evidence it is clear that figures of £20bn (over a ten year programme) are at eth extremes of credibility. There's also an illuminating discourse on both T31 and the Forex risk provision.
It is difficult to read the PAC report (and the associated media headlines) and identify how they relate to the actual evidence presented.....
And on the article on Prelude - don't forget that one of the highlights (often overlooked - and not really covered in the actual govt policy) in John Parkers National Shipbuilding report was that unlike commercial organisations who allocate control of long term strategic budgets to projects, the Treasury does not give MoD the same privilege. I know people who've been on that project in various forms since 2007 or so.
Oral evidence - Defence Equipment Plan 2017-27 - 14 Mar 2018
While it is clear that PUS, DFin and DCDS(Cap) are all unhappy with the level of financial risk being carried, when one actually reads the evidence it is clear that figures of £20bn (over a ten year programme) are at eth extremes of credibility. There's also an illuminating discourse on both T31 and the Forex risk provision.
It is difficult to read the PAC report (and the associated media headlines) and identify how they relate to the actual evidence presented.....
And on the article on Prelude - don't forget that one of the highlights (often overlooked - and not really covered in the actual govt policy) in John Parkers National Shipbuilding report was that unlike commercial organisations who allocate control of long term strategic budgets to projects, the Treasury does not give MoD the same privilege. I know people who've been on that project in various forms since 2007 or so.
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Public Accounts Committee roasts MoD.. again
And once again, nobody at the MoD gives ash it.This is just one set of Civil Servants having a pop at another lot. Nobody (in an office) is going to suffer the consequences of getting things wrong.
That's just not in the game.
Nothing new about this but the real question is whether it will make any difference. The concerns seem to be identified year after year. Defence equipment is getting more and more advanced and even more costly and the development timescales ever longer to bring to service. We have tried European collaboration and now Joint Strike Fighter and the same problems exist.
My real question (regarding fast jets) is whether we need the numbers ordered. 138 F35 and the hundred plus Typhoon.
If the answer is Yes then they have to be funded.
My real question (regarding fast jets) is whether we need the numbers ordered. 138 F35 and the hundred plus Typhoon.
If the answer is Yes then they have to be funded.
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To be fair, the DOT&E reports are statements of where the programme is against its baseline T&E schedule. They are always factually correct -they have to be - if often interpreted by some as the end of the world, rather than test schedule not being maintained. There's a difference between that and a report that seems to wilfully ignore or misinterpret the written transcript of evidence to paint a picture of chaos - which would appear to be stretching the truth somewhat - that could only be fixed by the often impractical recommendations of the committee.
Part of the reason some of the long-term capability programmes take so long to deliver is that they are subject to endless navel-gazing and governance scrutiny, compliance with which sometimes overtakes delivery as a goal. It is ironic that process instituted to ensure good VFM, can sometimes have the exact opposite effect. That's not to excuse incompetence by the way, just to highlight the effect that short-term control measures (eg ABC) can actually be deleterious to the objective. The evidence transcript on Dreadnought regarding the budget profiling is a good case in point - it's not the total spend amount that is a risk, but the spend profile in early years.
Part of the reason some of the long-term capability programmes take so long to deliver is that they are subject to endless navel-gazing and governance scrutiny, compliance with which sometimes overtakes delivery as a goal. It is ironic that process instituted to ensure good VFM, can sometimes have the exact opposite effect. That's not to excuse incompetence by the way, just to highlight the effect that short-term control measures (eg ABC) can actually be deleterious to the objective. The evidence transcript on Dreadnought regarding the budget profiling is a good case in point - it's not the total spend amount that is a risk, but the spend profile in early years.
HH,
Exactly right, as that is how the game is played. Introduce the high figure as a hypothetical "worst case", thereby being able to deflect any direct challenge by reference to the fact that it is "only" hypothetical, then as the years roll by, refer to it in increasingly concrete terms as an estimate, budget, etc
By getting a big number out early into the ether it price conditions the customer, and of course, he who warns is forgiven....
Exactly right, as that is how the game is played. Introduce the high figure as a hypothetical "worst case", thereby being able to deflect any direct challenge by reference to the fact that it is "only" hypothetical, then as the years roll by, refer to it in increasingly concrete terms as an estimate, budget, etc
By getting a big number out early into the ether it price conditions the customer, and of course, he who warns is forgiven....
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Arguably so, but none of them would have the balls to say so about the NHS, which suffers from a degree of financial diarrhoea on a scale which dwarfs that of the MOD...
I don't own this space under my name. I should have leased it while I still could
As Defence spending is set to rise it is obvious that the cost of the shopping basket must be increased.
Imagine if the budget was £100bn and MOD only needed £99bn and therefore planned a £1bn installation of swimming pools on the SSBNs, do you imagine the Treasury would cough up the funds?
Only by showing planned expenditure will exceed postulated budget can you get more money from the Treasury. The man is doing his job and having seen him, he looks the part.
Imagine if the budget was £100bn and MOD only needed £99bn and therefore planned a £1bn installation of swimming pools on the SSBNs, do you imagine the Treasury would cough up the funds?
Only by showing planned expenditure will exceed postulated budget can you get more money from the Treasury. The man is doing his job and having seen him, he looks the part.
