153. MoD acknowledged the importance of support and logistics in Future Capabilities:

Operational experience since the SDR [Strategic Defence Review] has shown the key role of logistics and the importance of sustainability as an enabler across all elements of military capability. As with other capability areas, logistics requires strengthening in order to meet the demands of concurrent operations. There will be further significant investment in this area. As part of the re-balancing of our Army structure we are strengthening our logistic capability at brigade level, and improving deployable port and maritime capabilities, which will help meet the demands of expeditionary operations. And drawing on our experience from Operation TELIC, we are also applying the latest technology to our logistic visibility and asset tracking capability to ensure the right materiel is in the right place at the right time.[175]

End to end logistics review

154. MoD's Annual Report and Accounts 2003-04, included a section on the end-to-end logistics review:

…in July 2003, a review of 'end-to-end' (E2E) Air and Land logistic support reported on how logistic support to Air and Land forces, including Naval Aviation and the Royal Marines, can be streamlined across organisational boundaries, from industry to the front line, and thereby generate improved logistic effectiveness and savings for investment in other Defence priorities. The Minister of State for the Armed Forces reported the findings to Parliament on 10 September 2003. The E2E Review Final Report proposed a future support strategy recognising that small and medium-scale operations outside Europe are now the norm, and that these will require logistic support that is joint, flexible, rapidly-deployable and robust. A more detailed Demonstration Phase validating the proposed scope and pace of change was completed in April 2004. It concluded that the original recommendations were sound and that the postulated benefits could be achieved. [176]

The key changes proposed by the E2E review include:

• Support infrastructure in the air environment to be concentrated in key locations and rationalised from four to two levels of Forward and Depth support.
• Support activity in the air environment to be concentrated where it could be carried out effectively. This meant that some Forward support activities could be moved back into Depth support decreasing deployed infrastructure.
• Land environment logistic support to be tailored for two states; peacetime support in barracks and deployed logistics, with robust arrangements for transition between the two.
• A better focus was needed to ensure the arrival of materiel in the theatre of operations in the right order, at the right place and at the right time. A permanent, joint organisation was needed to establish and prioritise a joint supply chain that would be driven by the needs of the joint commander of operations.
• MoD's approach to contracting to be improved to maximise the role that industry could play and to realise the benefits of competition.
• The cost of logistic support to be made clearer to budget holders who should own the corresponding funding. The Chief of Defence Logistics (CDL) must own the process from industry to the front line.[177]

155. In our Lessons of Iraq report, we concluded, 'Given how critical logistics are to operations, we expect MoD to implement the lessons identified in its reports on Operation TELIC, and also those lessons identified by the National Audit Office. We intend to closely monitor the progress of MoD's end-to-end review'.[178] Mr Ingram announced on 20 July 2004, that many of the principles and recommendations put forward by the E2E Final Report had been proven through pilot activities. The intention was to focus future activity on implementation and the early realisation of benefit. MoD had invested £18 million in the programme over the previous fifteen months. 'End to End Demonstration has identified efficiency benefit of between £16 million to £19 million per annum and identification of realisable benefit of around £330 million'.[179]

156. We asked CDL about the lessons that had been learned from recent operations relating to logistics. CDL told us that these operations 'did highlight areas where we can improve and, such was the importance of those areas from a collective perspective, not just a logistic one, we are now making significant progress across what we call the end-to-end regime that is truly holistic'.[180]

157. The end-to-end logistics review identified a range of major changes with the aim of improving logistic effectiveness and securing substantial efficiency gains. Although MoD appears to be making progress in implementing the review, we note that future improvements will be dependent on the continuing achievement of efficiency targets. We recommend that MoD sets out a timetable for the full implementation of the review.

Efficiency programmes and initiatives

158. We considered MoD's overall efficiency programme in Chapter 3 above. The efficiency targets and key efficiency programmes relating to the DLO are set out in the Table below.

DLO efficiency targets and key efficiency programmes

Source: MoD[182]

159. Major General Tony Raper, Defence Logistics Transformation Programme Team Leader, provided the following summary of the various efficiency programmes in the logistics area:

The DLO change programme… had a strategic goal, the balance of which was the £1.262 billion, for delivery by 31 March 2006. If you add on the amount that had already been delivered against that, that takes you up to about £1.8 billion. The end to end review also identified further efficiencies on top of those that had been taken inside the DLO change programme. The DLO change programme specifically looked at activities [within] the DLO budgetary area, rather than the end to end programme which has clearly taken account of those aspects of logistics which are within the front line commands and the services.[183]

160. We asked where the efficiency savings would be re-invested, General Raper told us that 'some of that is reinvested to improve processes within the DLO… Life in the logistic area will not get easier'.[184]

161. MoD subsequently told us that 'the overall savings from the MoD Efficiency Programme have been used to balance the Departmental programme as a whole'.[185] However:

every change programme requires a level of investment and DLO elements of DLTP will have some £215M invested over the above period to enable change to occur. Furthermore, the MOD had committed £61M on investment in asset tracking and improving the supply chain and is considering, in the current budgeting round, the level of priority for further investment in these areas.[186]

162. We note that there are a range of programmes and initiatives in the logistics area which are expected to deliver substantial efficiency savings. However, we are concerned that only some of these will be re-invested in logistics and to hear that 'life in the logistics area will not get easier'. We have previously noted that the measures to strengthen logistic support for land forces, by providing additional personnel, are to be resourced by reductions in infantry numbers. Given the crucial role of logistics and the shortcomings noted in recent operations, we are concerned that MoD is continuing to resource the total logistics effort in a piecemeal rather than a holistic manner.

Future support of military aircraft

163. The E2E review set out key changes for the air environment (paragraph 154 above). Future Capabilities states, 'Work continues to develop options for the future support of military aircraft'.[187] On 16 September 2004, Mr Ingram announced the Government's preferred way forward, subject to trades union consultation. The key points from Mr Ingram's statement were:

• The end-to-end review recommended that on-aircraft depth support—deep repair, scheduled maintenance and modification of aircraft—could best be rationalised by concentrating at main operating bases (MOBs), and that this conclusion should be tested in an investment appraisal.
• Confirmation that in order not to prejudice the in-service date of the upgraded Harrier GR9 of 2006, Harrier support would concentrate forward to the MOB at RAF Cottesmore.
• The wider investment appraisal and subsequent affordability analysis had demonstrated that concentrating support of the Tornado GR4 aircraft forward at the MOB at RAF Marham would provide best value for money compared with the alternative of concentrating backward on the DARA site at St. Athan.
• The continuing work had demonstrated that it would not be cost-effective to concentrate the Tornado F3 aircraft either forward or back, given that it would be replaced by Typhoon. The work had also shown that it would provide better value for money to concentrate depth support for Lynx, Chinook and Sea King back to DARA Fleetlands.
• MoD's preferred way forward had implications for the military and civilian work-force, as well as for partners in industry who undertake depth support of military aircraft.
• Concentrating support for rotary aircraft at DARA Fleetlands offered the opportunity to exploit fully the economies of scale that might be achieved by collocating these platforms at a single centre. Sufficient defence work would remain at DARA St. Athan to enable continued operations there until 2008-09.
• MoD would explore with other Government Departments alternative options for St. Athan after 2009, although the migration of work and the withdrawal from service of some platforms meant that 500 redundancies would be needed there in 2005.[188]

164. We were particularly concerned about the proposal to concentrate support of the Tornado GR4 aircraft forward at the MOB at RAF Marham rather than concentrating backward on the DARA site at St. Athan, as this appeared to go against the aim of the Strategic Defence Review which stated that:

A single Agency will also be created to repair and overhaul all military aircraft. This will amalgamate the Naval Aircraft Repair Organisation (responsible for helicopters) with the bulk of the RAF Maintenance Group Defence Agency (fixed wing aircraft). The new Agency will become a Trading Fund as soon as practical.[189]

DEFENCE AVIATION REPAIR AGENCY

165. DARA was formed on 1 April 1999, merging the two former agencies to create a single MoD-wide aviation deep-repair organisation. On 17 January 2001, MoD laid before the House a draft Order to establish DARA as a trading fund on 1 April 2001. Our predecessors held an inquiry into DARA and visited St Athan, DARA's largest site and its headquarters, in February 2001. Their report The Draft Defence Aviation Repair Agency Trading Fund Order 2001, was published on 7 March 2001. Its overall conclusion was:

The MoD sees benefits from converting DARA to a trading fund, which will develop a competitive alternative to its commercial sources of repair work, saving money for other more pressing defence requirements. For DARA, the change of status will challenge its previously sheltered relationship with the Department, but it will, we are persuaded, also bring benefits to the Agency. But if as a result DARA cannot deliver reduced prices and better performance, the MoD might be increasingly driven to place more of its repair work directly with industry, which would effectively leave DARA to wither on the vine. The Agency should become a trading fund on 1 April 2001, as planned. It should continue to have the status for the foreseeable future.[190]

166. The Government's Response to the Committee's Report stated:

Although allowing DARA to operate on a more commercial footing should help the MoD reap some of the above benefits, the Government supports the Committee's view that there must be important safeguards that the MoD will keep in place. In particular the requirement to ensure that there is assured access to repair capabilities and a capacity for surge workloads in times of crisis (as the Kosovo campaign in 1999 demonstrated). That continuing requirement must be protected in DARA.

The Government is pleased to note that the Defence Logistics Organisation is making a firm commitment to making DARA a successful Trading Fund and will be making investments and ensuring that DARA continues to be an integral part of the capability available to the MoD.

The Government welcomes the Committee's support for Trading Fund status for the DARA, which recognises the excellent work by both the DARA and the Ministry of Defence in transforming the management of our aircraft repair and maintenance business.[191]

167. DARA was the subject of a debate in Westminster Hall on 2 November 2004 and also featured in the Defence Procurement Debate on 4 November 2004. In the former, Mr John Smith MP, whose constituency includes St Athan, said:

During the past year, £18 million of taxpayers' money has been invested to build a state-of-the-art military hangar at RAF St. Athan. It is the size of six football pitches and is purpose-built to repair 47 fast jets at any time—the entire fleet.[192]

168. Mr Ingram said:

The completed investment appraisal and affordability analysis demonstrated that concentrating support of the Tornado GR4 aircraft forward at RAF Marham would provide best value for money compared with the alternative of concentrating backward at DARA St.Athan. In essence, the choice was either to move the aircraft to an existing main operating base for depth support or to move RAF personnel to DARA St.Athan. The latter would have meant significant up-front infrastructure costs, but either option would have meant a significant reduction in civilian posts. That was the reality. The investment appraisal and affordability analysis also showed that it would not be cost-effective to concentrate the Tornado F3 aircraft either forward or back, given that it will soon be replaced by the Typhoon.

For rotary wing aircraft, helicopters, the investment appraisal and analysis demonstrated that it would provide better value for money to concentrate depth support for the Lynx, Sea King and Chinook back to DARA Fleetlands, a civilian base, not a military base.[193]

169. Mr Ingram added, 'The consultation period ended on 27 October, and I have received a formal response from the trade unions which is now under consideration. I hope to make a final decision shortly and am only a matter of days away from doing so'.[194]

170. Prior to our evidence session with the Chief of Defence Logistics, we received a memorandum from the trade union Prospect[195] outlining concerns about the Government's preferred way forward of re-locating Tornado GR4s from DARA St Athan to RAF Marham. The memorandum raised a number of concerns including the possible closure of DARA St Athan by 2008, and concerns about the value for money of MoD's proposals. MoD also provided a memorandum, responding to the points raised by Prospect, the day before the evidence session. It stated that advice would be submitted to Ministers shortly and that that advice would take into account comments made by the Trades Unions.[196] The MoD submission concluded:

We consider that the comprehensive analysis in the IA [Investment Appraisal] and on the affordability of the options was carried out in an objective and impartial way, and we believe that the preferred option offers the best outcome for Defence in terms of operational effectiveness and value for money.[197]

171. We asked CDL about DARA. He told us:

When we applied that principle of better support and we looked at different ways of achieving it, the investment appraisal showed us that one particular area rolled forward to a single centre of excellence for depth was the right answer and in other areas rolled back into industry or DARA was the right answer.[198]

172. We asked CDL when RAF personnel had last undertaken the deep repair of aircraft and what experience service personnel at RAF Marham have in undertaking such work on Tornado GR4 aircraft. CDL told us that at RAF Cottesmore on Harrier aircraft:

we have already introduced something we call a pulse line lean system using RAF manpower, which has made huge efficiencies in that process. Of course, we have learned from that in the proposals for the business case for what we are going to do at [RAF] Marham.[199]

173. We asked what would happen if problems were experienced at RAF Marham with the deep repair of Tornado GR4 aircraft and where else this work could be undertaken. CDL told us that 'theoretically I suppose you could look back at the original manufacturer as one option'.[200]

174. CDL did not accept our suggestion that the proposals relating to DARA amounted to a re-nationalisation because 'other aspects of this review have resulted in a roll back. An example of that is that the helicopter community will go back to [DARA] Fleetlands because that was seen as the most effective and efficient way of conforming with depth and forward requirements in the future'.[201]

175. Following the evidence session, we sought from MoD the additional information which had informed the announcement on 16 September 2004, including copies of the Investment Appraisal and the Affordability Analysis. MoD provided copies of these documents[202] and a further explanation of the decision to re-locate support of Tornado GR4 aircraft from DARA to RAF Marham:

The End-to-End Review concluded that there was substantial excess capacity in all areas of air systems support… There was both a need and substantial scope for improvement in all areas. It also reflected the fact that, with some notable exceptions, the Department and the Services were not using industry modern best practice to drive down the cost of supporting military aircraft. The case for significant change was unarguable.

It was clear then—and demonstration since has amply proven—that significant improvements can be made to the productivity of the RAF personnel through the application of lean techniques, enabling more work to be done at front-line bases, whereas there would be significant costs and operational penalties in moving these personnel from the Main Operating Bases (MOBs) to St Athan. These personnel form part of the "Crisis Manpower Requirement" for the Royal Air Force, which determines how many RAF personnel we need to sustain the level of concurrent operational deployments for which the Department plans. Accordingly, these personnel must be uniformed personnel and cannot be replaced by civilians or contractors. Where the total depth support task exceeds the number of RAF personnel required to support deployments, the remaining work would be carried out at MOBs by civilians or contractor personnel.[203]

176. A report by the Management Accountancy Services (Army) examined 'the comparative incremental costs for the rolling forward or rolling back of on-aircraft Depth support for 5 platforms (Tornado GR4, Tornado F3, Sea King, Lynx and Gazelle) to single Depth facilities under 3 options'.[204] The three options were Roll Forward and Roll Back and a Hybrid option.[205] For Tornado GR4 the report assessed the Roll Forward option at £25.449 million, the Roll Backward option at £35.955 million and the Hybrid option at £25.464 million and concluded that 'In summary, the Roll Forward and Hybrid options present better value for money than the Roll Back'.[206]

177. We were concerned about the substantial investment that had been made in the DARA St Athan site. MoD told us that the original decision to proceed with the modernisation of the St Athan site was taken on the basis of a sound business case and that:

The work load projections in the Red Dragon business case indicated that the case for Red Dragon (in terms of MOD work) was soundly based in the short to medium term out to 2008/09 but there was a need for DARA to find commercial work in the medium to long term. It was not possible to take into account the effect of the End to End Logistics Review at the time the Red Dragon business case was approved, since the Review had not yet then started.[207]

178. On 25 November 2004, Mr Ingram announced his decision 'to implement the preferred strategy'. On 16 December 2004, he wrote to our Chairman to update him on the future of DARA and the work that he was commissioning. MoD was reviewing strategic options for the future of DARA. Mr Ingram stated that 'The decision as to whether DARA should remain part of the Department therefore needs to be considered… The alternative to retaining DARA within MoD would be to place parts or all of it in the private sector'. He emphasised that the decision to undertake a study of these matters 'does not in any sense imply that we see sale to the private sector as a 'preferred' option'.[208]

179. We find it surprising, given the substantial investment to create a state-of-the-art aircraft repair facility at DARA St Athan, that MoD has announced that support of Tornado GR4 aircraft will be moved to the Main Operating Base at RAF Marham. We expect MoD to work closely with all interested parties to ensure that DARA St Athan has a future and we expect MoD to keep this Committee informed of the current study reviewing the strategic options for the future of DARA St Athan.

180. We are aware that the revision and concentration of Tornado maintenance in the RAF was driven by a need to reduce both costs and manpower, as well as to improve procedural efficiency. If these drivers are not to have an adverse impact on operational effectiveness, the new arrangements at RAF Marham will need to match, if not exceed, the high standards set by the skilled workers at DARA St Athan. We expect MoD to monitor this closely.

181. We find it of real concern that if problems are experienced at RAF Marham, MoD may be dependent upon the original manufacturer of the aircraft to undertake repairs. One of the reasons why DARA was created in the first place was to provide 'assured access to repair capabilities and a capacity for surge workloads in times of crisis'. It is not apparent how the proposed arrangements at RAF Marham will meet this requirement.

Asset tracking

182. A key logistic lesson identified from Operation Telic was the need for a robust system to track equipment and stocks both into and within theatre—a requirement which had previously been identified in the 1991 Gulf War. We concluded in our Lessons of Iraq report:

The lack of such a system on Operation Telic resulted in numerous problems with the in-theatre distribution of critical items such as ammunition, body armour and NBC equipment. MoD has told us that having such a system is top of its logistics priorities and we understand that proposals will be submitted to Ministers in the spring. We urge Ministers to provide the necessary funding. However, we find it deeply unsatisfactory that a full system is unlikely to be in place within the next five years.[209]

183. In its response to our report, MoD stated:

Both the NAO report and the Department's own reports on Operation TELIC recognise shortcomings in our ability to track equipment in theatre, and the issue of tracking has been examined. A package of improvements for logistics materiel management has been identified which includes tracking. This package would require funding and options will need to be considered as part of the Department's planning round against other priorities. If funded, the enhancements will provide a robust tracking capability. [210]

184. During our inquiry we asked about the progress in introducing a robust asset tracking system.[211] Sir Kevin Tebbit, Permanent Under Secretary of State at MoD, told us:

There is no simple off-the-shelf solution… What we are doing is putting in place an in-transit visibility system to help us from the deployed location to the front-line. We did introduce it at the end of the operation and it made a huge change straightaway; so we know it works. It is called TAV. It is an American system. We had TAV Minus. We are now integrating this thing (TAV) into our existing logistic systems and that is already proving to be a great help. It does not cost a fortune. The software costs are not huge. I think the full figure you have got probably there is around £17 million. We have already spent about half of that on this. But you also need people who are trained to use it at both ends.[212]

185. Sir Kevin acknowledged that greater effort was needed on operational logistics.[213] To assist this, MoD had created a new post—'ACDS [Assistant Chief of Defence Staff] operational logistics two-star appointment'.[214] But it is also essential that there are sufficient numbers of people with the appropriate training to undertake the asset tracking. Sir Kevin told us that 'That is part of the 3,000 that will be added as a result of the change in the four regiments, four battalions'.[215] As we noted earlier, the final allocations for the reinvestment of those infantry posts are still to be determined, but in January 2005 General Jackson told us that provisionally 396 of the 3,000 would be logisticians.[216]

186. In terms of timescales, we asked when MoD would have a 'unified tri-service logistics system'.[217] Sir Kevin told us that 'we will be progressively getting better between now and 2007…the issue is we have legacy IT systems that we have to put smart front-ends on to pull them together and give everybody the same amount of information'.[218] We asked whether, by 2007, MoD would have a system where it would know where everything is and what container it is in.[219] Sir Kevin's reply reflected the chequered history of logistics capability programmes in MoD:

Now I have been in the job for six years, I am not going to say "Yes" again. What I am going to say is, you know, I stake a lot of my job on getting this right and making sure it happens progressively and I will continue to do so. [220]

187. A key logistics lesson identified from Operation Telic was the need for a robust system to track equipment and stocks both into and within theatre. MoD is now investing in a system to deliver an 'in-transit visibility system to help us from the deployed location to the front-line'. However, it is disappointing that MoD could not assure us that such a system would be fully functioning by 2007. We look to MoD to set out a clear timetable for the early introduction of the system, and to ensure that the required number of personnel with the appropriate training are available to operate the asset tracking system.

176   HC (2003-04), 1080, p 66 Back

177   HC Deb, 10 September 2003, c 26-7WS Back

178   HC (2003-04) 57-I, para 283 Back

179   HC Deb, 20 July 2004, c 234W Back

180   Q 388 Back

181   The DLO change programme and end-to-end study were merged to become the Defence Logistic Transformation Programme on 1 April 2004 Back

182   Ev 170 Back

183   Q 481 Back

184   Q 483 Back

185   Ev 170 Back

186   Ev 170 Back

187   Cm 6269, p 11 Back

188   HC Deb, 16 September 2004, c 164-165WS Back

189   Cm 3999, p 47 Back

190   The Draft Defence Aviation Repair Agency Trading Fund Order 2001, Fourth of Session 2000-01, HC 261, para 48 Back

191   Fifth Special Report, Session 2000-01, HC 514, paras 4, 12, 14 Back

192   HC Deb, 2 November 2004, c 27-28WH Back

193   HC Deb, 2 November 2004, c 30-31WH Back

194   HC Deb, 2 November 2004, C 31WH Back

195   Ev 117-119 Back

196   Ev 158-160 Back

197   Ev 160 Back

198   Q 407 Back

199   Q 420 Back

200   Qq 428-429 Back

201   Q 451 Back

202   Ev 168-169 Back

203   Ev 169 Back

204   Ev 181 Back

205   Ev 181-182 Back

206   Ev 185-186 Back

207   Ev 169 Back

208   Ev 213 Back

209   HC (2003-04) 57-I, para 291 Back

210   Lessons of Iraq: Government Response to the Committee's Third Report of Session 2003-04, First Special Report of Session 2003-04, HC 635, para 136 Back

211   Q 58 Back

212   Q 60 Back

213   Q 63 Back

214   Q 63 Back

215   Q 63 Back

216   Q 652 Back

217   Q 66 Back

218   Q 65 and Q 67 Back

219   Q 68 Back

220   Q 68 Back