Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 60-79)



  60. What you are saying is that the defence of the country is based on the budget which is given to you.
  (Vice Admiral Sir Jeremy Blackham) So is every other public service.

  61. I am sure it is, but there is a slight difference between the defence of the realm and clearing rubbish from the streets.
  (Vice Admiral Sir Jeremy Blackham) I agree, there self-evidently is. I am given a budget. I should very much like to be able to set my own budget, but unfortunately that power has not yet been given to me, although maybe my friends on the right will do that one day.

Mr Rendel

  62. May I start on Figure 7, page 10 and in particular looking at the Swiftsure and Trafalgar project? I just want to be absolutely clear in my own mind about this. Are we saying that during the year under review the thing went back a year and therefore in effect, come the end of the year, we were no nearer getting it than we were at the start of the year?
  (Sir Robert Walmsley) That is one way of describing it. It is a brutally fair way but I would make another point, which is that at the end of the year it is a year further away than it was when we started the year. What that means is that we have discovered more work to be done.

  63. According to paragraph 1.24 the main reason for this was software engineering problems. Is that right?
  (Sir Robert Walmsley) Spot on.

  64. I am staggered that you can start writing some software and get absolutely no further at all by the end of the year. I can understand you suddenly realising that you have to take a bit longer to write your software, it is more complex than you thought, you have more sub-routines to write, but actually to get nowhere, get no further forward during the year, does seem staggering.
  (Sir Robert Walmsley) It does until you suddenly find that you are part of one of these programmes. What happens is that you write enormous quantities of software and then you go to test them on what they grandly call the hardware platform, which may or may not be the real platform, it could be an emulator and in this case it was. What that showed was that the transfer of data between different parts of this integrated sonar set, which is an immense undertaking, was a far more complex engineering feat than the contractor had appreciated or we, so the task got bigger. Back to the point I was trying to make. It is not as though you have been doing nothing for a year. It means that the testing showed that there was far more work still to be accomplished than we had understood or the contractor had understood.

  65. Another point made in paragraph 1.21 is that there has been no recovery of any of the previous slippage at all on any of these projects. Why have we not been able to recover any of the slippage on any one? That also seems extraordinary.
  (Sir Robert Walmsley) It is jolly irritating because people work incredibly hard to try to hold these programmes. They are very ambitious taut dates, nobody likes slippage on their programme, I do not like slippage on any programme, Admiral Blackham does not like slippage on any programme. Once a programme has slipped though a number of things start to happen. Sensibly, we do not train people to operate something until we plan to deliver it into service. The manpower is synchronised to the actual plan date. Of course, sensibly, we take account of the impact on our spending budget. So if there is money which is not going to be spent on this because it is not making progress, that money is allocated elsewhere and if you want to bring the date back, you then have to get the money back and put the training in place. It is the integration of these programmes across the manpower and the money field which tends to prevent me from recovering slippage. However, I am pleased to say that I do think we shall recover two months, which is not much, but every minute of that will be hard fought on the LPD(R), which will come forward from a March 2003 in-service date to a January 2003 in-service date. It does not sound much, but it has been a struggle.

  66. I more or less accept that. I find it slightly hard to accept your explanation about how the money goes. I would have thought that if you have a long-term budget, and you tell us that you have some idea about your budget for the next 10 years or so, if you had been able to transfer some of that into another project because you have had slippage in one project and you have not needed the money, then it seems to me that you are more likely to have some spare cash in the project to which you have transferred something and you can bring it back next year and perhaps work rather quicker on the one which has slipped.
  (Sir Robert Walmsley) I am sure all that is true but I lost it half way through the explanation. I just know that once a project slips the cash which was earmarked or the resource which was earmarked for sustaining that project is quite easily swallowed up by another project and that tends to be what happens because we balance our budget year by year.

  67. If it is swallowed up by another project, then you would expect that other project either to be moving forward faster, because it now has more money than it was originally expected to have or that perhaps there might be some money from that other project in the following year which could come back to the one which slipped.
  (Sir Robert Walmsley) Or the money is taken away from the equipment programme because we do not run a self-contained world. Admiral Blackham could explain to you about that, how money is traded inside the Ministry of Defence.
  (Vice Admiral Sir Jeremy Blackham) It is perhaps worth saying that I think there is a confusion about which budget things occur in. The equipment plan holds no money for manpower or training, indeed for in-service support. That is part of the other three quarters of the budget to which Sir Robert referred. Where there is a transfer within the equipment programme that affects the rate of delivery of equipment, but the planning involved in generating manpower, in providing training for it, is done somewhere else. It may simply not be possible, if we have agreed that we have no choice but to slip a project and that manpower is then used for something else which is going on—manpower after all is as scarce a resource as money—it may be very difficult to switch that manpower back again and get it trained in time.

  68. What Sir Robert was saying was that if you have a slippage then you have some spare cash in that year, or may have some spare cash because you are not spending the money on that particular project. If you then transfer that to one of your other projects, you would expect that second project either to be brought forward, to come in sooner than you were originally expecting it, or if it has already slipped for some of that slippage to be caught up. You have slippage going on, so presumably there is money available to be transferred to some of these other projects, but on none of them have you caught up any of the slippage.
  (Sir Robert Walmsley) I think I can answer that now. I have got it. We, rather like airlines used to overbook aircraft, do the same with the defence budget. We run at round about a seven per cent over-programming. What that means is that for the first seven per cent of slippage we are merely coming back on track.

  69. If you did not have slippage you would be in real trouble. That is forcing you to have slippages; no wonder you have slippage if you are building it in.
  (Sir Robert Walmsley) It is a very careful judgement. We used to have a 20 per cent discount five years ago and we have brought that down to about seven or eight. One of the ways in which you can tell that we are reducing slippage is that this discounting of the total budget has hugely reduced in recent years.

  70. What you are saying is that you are expecting always to have slippage and if you do not have seven per cent slippage you are going to go over budget.
  (Sir Robert Walmsley) That is what 90 per cent confidence means. It means that one time in 10 things will go wrong. I think that is real life.

  71. Can we look at Figure 8 which Mr Osborne was asking about before? I want to put it a slightly different way. There seems to be a clear correlation here between slippage and elapsed time. Can you say why there is that correlation?
  (Sir Robert Walmsley) It is reasonable to imagine that if you start out on quite a short project which is running for four years, you would not expect that to slip as much as a project you knew was going to take 15 years. That is just instinct to me. When we talk about narrowing this three-point estimate spread, we would have to say that the target for what was an acceptable spread would probably be greater for a project which was going to run for 10 years than one which was going to run for two years.

  72. Is that just because of the uncertainty, not because things always turn up later on during the project?
  (Sir Robert Walmsley) And a bit of proportionality. If you have 120 months of work you might imagine that there was a plus or minus five months on it. If you only have 12 months it might be plus or minus one month.

  73. If you did this as a proportion of the elapsed time, you would expect the line to be much flatter. This is absolute delay against elapsed time, is it not? If you are talking about proportionate delay against elapsed time then you would expect a straight line across the middle.
  (Sir Robert Walmsley) Yes, and of course the graph is attempting to show that the less the elapsed time, the less the delay. Some of my favourite projects are not on here. I should like to put the Trident project on here and see where that sat.

  74. Has the C&AG drawn such a graph of proportionate delay rather than the absolute delay against the elapsed time?
  (Sir John Bourn) No, we have not, but it is an interesting thought.

  75. Have you done one?
  (Sir Robert Walmsley) I have.

  76. Can you show us in a note perhaps later or do you have it with you?
  (Sir Robert Walmsley) I have done it on the assessment phase projects to show it in terms of the spread related to the predicted duration of the project. There is no correlation whatsoever, which is worrying me a bit.

  77. I am not sure I quite understand how that works. It would be interesting to see that graph, if you could send us a note afterwards with the graph in it.
  (Sir Robert Walmsley) It is purely based on the information this report is presenting, the same information that is in this report in a different way. It is showing the spread of the three-point estimate as a proportion of the total expected duration of the project.

  78. What I was looking for was the delay as a proportion of the total expected length of the project.
  (Sir Robert Walmsley) I could do that; that would be the same.

  79. That was what I was looking for and it would be interesting to see.
  (Sir Robert Walmsley) We can do that.[4]

4   Ev 17, Appendix 1. Back

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