Select Committee on Defence Fourth Report


123. In this final section of our report, we examine further the outlook that Sir Jock Stirrup brings to his new appointment, and how that fits with the direction of the smart procurement/smart acquisition initiative four years after its launch.

124. Sir Jock is the second Deputy Chief of Defence Staff (Equipment Capability), succeeding Sir Jeremy Blackham. The post was created as part of the 'smart acquisition' (formerly 'smart procurement') initiative, introduced with the SDR in 1998. Under smart acquisition, responsibility for delivering equipment programmes within budgets and deadlines is concentrated in the hands of 'integrated project team' leaders— situated in the Defence Procurement Agency (DPA) until the equipment is acquired, and then in the Defence Logistics Organisation (DLO) once it is in service. In the first of a series of inquiries on the progress of the smart acquisition initiative, the NAO recently examined the implementation of integrated project teams, and commented that they had been introduced rapidly and successfully.[295] But a second, and perhaps just as important, strand of smart acquisition was the establishment of a clearer 'customer' for equipment provided by the 'suppliers' in the DPA and DLO.

125. As the MoD's central 'customer' for equipment, Sir Jock's organisation is responsible for determining what equipment 'capabilities' need to be satisfied (and their relative priorities), without specifying what sort of equipment or 'platforms' might best satisfy those capabilities. Indeed, some capabilities may be provided by several platforms operating together, and some platforms may provide several different capabilities. It was this that made us focus much of our examination of the Sea Harrier withdrawal on Sir Jock. The structure of his organisation reflects capabilities rather than platforms. Around a dozen Directors of Equipment Capability (shown in the figure below) manage 'Capability Working Groups' to identify possible equipment concepts to fill capability gaps. These Groups—some 50 overall—include staff from integrated project teams, the prospective Service end-user of the equipment, and industry.

Capability Managers within the DCDS (EC) organisation, showing where our monitored equipment programmes fit

Strategic Deployment
Information Superiority
Above-water battlespace.
  • Future Carrier
  • Type-45
Theatre Airspace.
  • Eurofighter
Command, Control & Information Infrastructure.
  • Bowman
Direct Battlefield Engagement.
Underwater battlespace.
  • Submarines
  • Nimrod MRA4
Deep Strike.
  • JSF
  • FSTA
  • Sea Harrier/RAF Harrier
  • Tactical UAVs
Indirect Battlefield Engagement.
Deploy, Sustain & Recover.
  • A400M
  • Ro-Ro ships
     Tactical Mobility.
        NBC Defence.
       Special Projects.
       Combat Service Support.

126. In a recent speech[296] Sir Jeremy Blackham emphasised that a flexible and incremental approach to acquisition was important, and the equipment customer needed more freedom to change its mind about requirements and their solutions. There was inevitably a tension with the Defence Procurement Agency (the 'supplier'), however, whose focus is on meeting measurable and stable targets which are mostly about timeliness and cost. The result, he indicated, is a risk-averse approach, and an unwillingness to change publicly announced targets. There needed to be a greater understanding that better value may mean spending more on some equipments to get what is really needed — "What you measure is what you get, and so it is 'customer value' that we must learn how to identify and measure".

127. As our predecessors reported last year, it has been easier to measure performance against cost and timeliness criteria; a point echoed in Sir Jeremy's observations above. Our predecessors had monitored the progress of the smart acquisition initiative, and sought in particular to assess its achievements against its aims of delivering equipment 'faster, cheaper, better'. When launched, smart procurement was expected to save £2 billion over the 10 years to 2008, and in the last Spending Review (in 2000) the MoD anticipated savings of £750 million for the three years to 2003-04; £50 million in excess of the savings previously profiled to deliver the £2 billion longer term savings. In our predecessors' report on the MoD's annual reporting cycle, however, they noted the difficulty of determining conclusively the benefits achieved [297] even on just cost and timeliness grounds.

Achievements against targets for 'Major Projects Report' programmes

Achieving 'core requirements' of the equipment
Average cumulative ISD slippage
19.9 months
21.8 months
23.1 months
23.6 months
11.4 months
Average in-year ISD slippage
3.8 months
1.8 months
0.5 months
Average cumulative cost variation
Average in-year cost variation

128. In the most recent Major Projects Report[298] the NAO reviewed the development of performance indicators to capture more fully the achievements of smart acquisition. They noted that the £2 billion cost reduction target was an input measure that does not capture the full impact of smart acquisition on equipment capability and project duration, and that the MoD—

    will not therefore be able to demonstrate comprehensively... that the cost reductions have actually been used to deliver the planned capabilities at the end of the 10 year period within the envisaged budget, or that project timescales also reduced in that period. This is because cost reductions identified on projects may be balanced by additional costs elsewhere on the same project or in other parts of the defence equipment programme, and additional costs may be traded-off against time or capability.[299]

A 'joint performance task force' is bringing together the range of performance indicators on equipment acquisition and support performance from the Defence Procurement Agency, the Defence Logistics Organisation and the Equipment Capability Customer,[300] and developing indicators to demonstrate at a corporate level whether performance is improving.[301] To assist that work, the MoD will track progress on 11 large equipment programmes, covering 60% of the expected smart acquisition cost reductions, to establish whether forecast reductions actually materialise.[302]

129. Against the background of Sir Jeremy's comments on the MoD's still strong focus on cost and time measures, we sought the views of his successor. We would not expect Sir Jock, new in post, to express himself in Sir Jeremy's forthright terms. He clearly shared, however, Sir Jeremy's desire to ensure that the procurement system is responsive and delivers 'valuable' capabilities—

    During the Cold War, our primary aim was deterrence and, to an extent, deterrence was more about what was in the shop window than what was on the store shelves in the back. Since the Cold War, we have been employed on military operations extensively and we continue to be so. We send our young men and women to do difficult and dangerous things in often unpleasant circumstances, and we have to give them the wherewithal for them to go out and win and come home safely. That means support as well as the shop window equipment. We cannot afford to be hollow because we would not succeed. The changing strategic environment has had a significant impact. Equally, the pace of technological advance and the sort of technological advance that is available relatively easily to... potential adversaries has become quite widespread. The sort of asymmetric threats that we face are relatively easily available, and we need to be able to respond to those. That presents us with a particular challenge ... [so] we need short term agility in terms of delivering equipment capability. [303]

130. More generally, Sir Jock considered that the MoD had reached a critical stage in the development of the equipment capability area[304]—

    If I can use a metaphor here, we have reached the position where the first stage is now separated and the second stage has to ignite. Otherwise, as ever with these sorts of changes, there is a danger that the thing will descend back into institutionalism.

    What we are about is achieving success on the battlefield and that requires us to take a look at our equipment capability much more as a whole rather than as a set of different projects. The Directors of Equipment Capability are not equipped to do that ... [We have] to continue the process of giving them the appropriate strategic guidance and making sure ... that the projects which come out at the end can be used synergistically as a whole rather than as a set of largely unrelated capabilities, and that is the key area where we now have to move forward.[305]

131. It seems to us that at such an opportune juncture, there needs to be a new focus on integrating the perspectives and priorities of all of the key players in the MoD who will have to work closely to make smart acquisition a success—and a success not just on cost and timeliness fronts, but in a way that delivers what the equipment user really needs and "values". To bring that about will require a sharper focus on measuring value in the MoD's procurement programmes. As a first step, the MoD should consider the value of including the central Equipment Capability Customer on the new 'Investment Appraisals Board', which was set up to replace the Equipment Approvals Committee.[306] Although the Vice Chief of Defence Staff already represents the Service equipment user on the IAB,[307] a place also for the Equipment Capability Customer would help give greater weight to the sorts of capability trade-offs and 'values' that Sir Jeremy referred to, and the responsive procurement organisation and synergistic approach that Sir Jock wants to see.

295   Report by the C&AG, Implementation of Integrated Project Teams, Session 2001-02, HC 671 Back

296   At the Driving Down Equipment Costs conference, Abbey Wood, 30 January 2002 (Reproduced in RUSI Journal, April 2002). Back

297   Eighth Report, Session 2000-01, The MoD's Annual Reporting Cycle 2000-01, HC 144, para 83 Back

298   Report from the C&AG, Major Projects Report 2001, Session 2001-02, HC 330 Back

299   ibid, para 3.8 Back

300   ibid, para 3.12 Back

301   ibid, para 3.2 Back

302   ibid, para 3.7 Back

303   Q 179 Back

304   Q 156 Back

305   Q 157 Back

306   Ev 120 Back

307   VCDS commands both the Service equipment-user commands ("customer 2") and the DCDS (EC) ("customer 1") Back

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