The Government's Strategic Defence Review emphasised the increasing need for joint forces to meet the more varied challenges of the modern world. As you will be aware, it was decided as part of this emphasis to create the Defence Logistics Organisation (DLO) to provide for the Armed Forces more flexible, more effective and more efficient logistics support on a joint basis. The permanent headquarters of the DLO will be fully established on 1 April 2000, replacing an interim HQ in London and the headquarters of the three Principal Administrative Officers (PAOs): Naval Support Command in Bath, the Quartermaster General's Department in Andover and RAF Logistics Command based at RAF Brampton and RAF Wyton.

  We have undertaken a comprehensive investment appraisal and business case study to inform a decision on the permanent HQ DLO location. Business drivers for the location included sufficient space and long-term flexbility for the evolving organisation; the imperative of an early collection to achieve the maximum benefit of a unified organisation from the beginning; proximity to the DLO's main business units, the Defence Procurement Agency at Abbey Wood and customers in MoD and the front-line commands; and cost over 25 years.

  I am writing to inform the Committee that, subject to full consultation with the Trades Unions, I have decided to base the headquarters at Ensleigh in Bath. Existing space at the site will allow the headquarters progressively to move to Ensleigh over the course of the DLO Foundation Year (1999-2000), and be fully operational in its new surroundings by 1 April 2000. This location will enable the Chief of Defence Logistics to drive forward the revolution in logistics and achieve the full scale of early business improvements expected from his newly unified organisation, to enable the DLO to meet its vision to excel as an integrated and responsive defence logistics team. It will also allow HQ DLO to work closely with the Defence Procurement Agency at Abbey Wood to develop a fully integrated seamless approach to acquisition through Smart Procurement.

  The permanent headquarters will be small and strategic, and therefore the choice of location will only directly affect a tiny proportion of the DLO's staff: some 300 currently spread across the PAO sites and London. This is approximately 0.8 per cent of the overall size of the new organisation, and also represents a small percentage of the MoD employees at each of the present PAO sites.

  When the formal consultation with the Trades Unions has been completed next month, I will be able to make a final decision, after which transition planning can begin in earnest with the aim of completing the move to the new location by 1 April 2000. I should be in a position to inform the Committee of this decision next month.

4 May 1999