SMART PROCUREMENT

"We intend to continue monitoring the achievements of Smart Procurement, both overall and in connection with individual programmes, as the initiative becomes bedded in. We expect future DPR to report details of its achievements, whether they have already been realised or reflect projected savings on future budgets." [HC158 paras 129-133]

56.  It has always been the intention of the Smart Procurement initiative that, following implementation, the revised procedures and new behaviours would become fully embedded within those organisations concerned with its operation. The Ministry of Defence therefore expects reporting of its achievements to become an intrinsic element of the formal Departmental, Defence Procurement Agency and Defence Logistics Organisation reporting mechanisms.

57.  Given the establishment of Integrated Project Teams (IPT) will have only just been completed by the end of this financial year, the 1999/2000 Performance Report will necessarily only be able to cover implementation progress and projected savings on future budgets. Actual achievements will take time to materialise. Work is being initiated to refine the methodology for tracking performance in delivering benefits, and to embed reporting systems that reflect Smart Procurement for each organisation, and the Department as a whole.

CANCELLED EXERCISES

"The annual Royal Marines Arctic warfare exercise in Norway ..................This exercise must be reinstated next year."


"HMS Westminster's participation on the Flotex exercise was cancelled, again as an in year budget management measure and the ship was instead a feature of the New Millennium celebrations on the Thames." [HC158 para 147]

58.  The cancellation of the Royal Marine Winter Deployment to Norway was taken against a background of increasing numbers and scale of operational commitments, as well as the need to live within the financial provision voted by Parliament. A Winter Deployment for the Royal Marines is planned as part of the Exercise Programme for 2000/01. The Cancellation of HMS Westminster's participation on the Flotex exercise was unconnected with her participation in the New Millenium celebrations on the Thames. HMS Westminster would have taken part in this event irrespective of the Flotex exercise as the two did not conflict.

"Given that so many exercises had to be cancelled because of over-commitment it is deeply worrying that there was insufficient money to pay for some of even the residual exercises planned. Without regular exercises for high intensity conflict, standards in our Armed Forces will plummet, whatever the quality of the people and equipment." [HC158 para 147]

59.  The Government does not recognise the description of the last year. Whilst it is true that a number of exercises had to be cancelled due to operational pressures and some for financial pressures, a large proportion of the exercise programme was completed as planned, and was described in paragraphs 18-19 and Annex H of the 1998/1999 Departmental Performance Report. The Armed Forces took part in a wide range of multinational and national exercises to prepare themselves for both war and non-warfighting situations. Indeed it is the skills that the Armed Forces learn in such training and exercises that have been honed in Operations during this very busy period. Earlier in its report the Committee refers to the UK's Armed Forces as "amongst the best in the world", that they remain so highly regarded is due, in part, to the high importance that the Ministry of Defence places on training and exercises. Our Armed Forces are trained and equipped for high intensity warfighting which experience has shown allows them to conduct operations successfully across the whole spectrum of scenarios.

DERA PPP

"We take this opportunity, however, to repeat our call for the Department to abandon its plans and for the proposed £250m funding to be added to the baseline in the Spending Review now getting underway." [HC158 para 154-157]

60.  The Strategic Defence Review made a clear commitment to explore PPP opportunities for DERA in order to optimise its ability to continue to provide a scientific and technical capability to MOD. The specific objectives required to be met in developing a suitable PPP solution include:

• Capability: to find a solution that ensures the continuing availability to MOD of the scientific and technical capability required to support UK defence needs.

• Financial: to ensure long term value for money for MOD and the taxpayer.

• Wider Issues: to address wider UK needs, in particular those of DERA's other Government department customers. To provide a solution compatible with MOD and wider Government policy on science, defence research, Smart Procurement, defence diversification and relationships with Allies.

61.  Set against this background a PPP structure will meet the strategic needs of DERA enabling it to develop and enhance its world class scientific and research capabilities. The introduction of private sector disciplines and the ability to use capital more flexibly and to explore commercial opportunities will also give DERA significant advantages over its current status.

62.  For planning purposes it has been assumed that the DERA PPP will generate a receipt for the Exchequer and that an element of this will form a credit to the defence budget. The size of any receipt will depend on the actual PPP option chosen and no final decision on this has yet been made.

63.  Whatever solution is selected it must be capable of strengthening DERA's ability to continue to provide world class scientific research and allow it to be a flexible and responsive organisation, whilst at the same time preserving our essential defence interests and maintaining our valuable collaborative relationships.

EFFICIENCY PROGRAMME

"There is, it seems to us, a fundamental implausibility in the total efficiency claimed by the MoD over the years."


"....we will want to collect information on all of the higher value efficiency measures claimed, and then to examine more closely a selection of case studies. We cannot be expected to believe the MoD's assurances that these measures are genuine efficiency savings, and not cuts, until it produces this evidence. A year on year programme of efficiency savings can have a debilitating effect at all levels of command, and can be destructive to the quality of life that will sustain retention in the Armed Forces." [HC158 paras 158-160]

64.  The Government notes the Committee's wish to examine the Department's efficiency programme in more detail. The Ministry of Defence has recently provided details of 101 efficiency measures and a copy of its efficiency instructions, which it hopes will help to reassure the Committee. The Department is happy to engage in a further dialogue on this issue. On a separate point, paragraph 158 of the committee's report contains a slight error; the efficiency target for this year (1999/00) is £475m and not £525m as stated, which represents our current forecast.

"Overall, we conclude that the condition of the Defence Budget is sufficiently poor to give rise to concern. The cumulative evidence of cancelled exercises, delayed equipment programmes and of resources apparently insufficient to reverse the problems of overstretch and undermanning suggest that if the wheels have not yet come off the SDR, they are certainly beginning to wobble alarmingly. The Department's finances should be re-balanced in the current spending review. Commitments and resources have to be brought back into line, or we risk finding ourselves stumbling from one crisis to the next." [HC158 para 161]

65.  It is the nature of defence that there are always things on which more money can be spent. The Department's task is to maximise defence capability within a reasonable share of public sector spending as a whole. The Ministry of Defence believes that the Department has done that in the SDR and as a result the Department has a better balanced and focused defence programme. The SDR programme is deliverable, although some of the improvements it envisaged will take time to deliver.

66.  Spending plans for the Department out to 2004 are being considered as part of this year's Spending Review. It is obviously too early to speculate on the outcome at this stage.