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Amended copy - Independent review of Defence Acquisition published

News Release issued by the COI News Distribution Service on 15 October 2009

An independent review into the way the MoD buys equipment for Britain’s Armed Forces has been published today.

Last year, the previous Defence Secretary commissioned Bernard Gray to assess what steps the department was making to reform its procurement process and suggest further recommendations for how it can be improved.

Since then, a review team led by Mr Gray has met with MoD officials, representatives from the Defence Industry and other organisations to obtain a clear picture of the way the Department purchases and delivers equipment.

His findings, which are published today, identify a number of areas where the acquisition process could be improved. The MoD accepts the report’s two main themes: a need to bring equipment plans into line with likely available resources; and a need to improve equipment programme planning, management and delivery.

The report also acknowledges that all countries struggle with the complex challenges of defence procurement and some are envious of the UK’s achievements. It recognises the dedication of those involved in Defence acquisition, the MOD’s longstanding commitment to reform and the significant progress made to date.

Welcoming the report, Lord Drayson, Minister for Strategic Defence Acquisition Reform, said:

“Bernard and his team have done a thorough job. They have done a comprehensive review of defence acquisition and have come up with a strong package of measures to ensure the right equipment is delivered in the most efficient way. Quite simply, we accept most of his recommendations and are getting on with implementing them alongside broader work to develop a future strategy for Defence Acquisition, which will ensure we deliver as effectively as possible the equipment the Armed Forces need.”

Mr Gray has agreed to participate in this process and work with the MoD to develop an overall Strategy for Acquisition Reform to be published in the New Year.

Commenting on his report, Mr Gray said:

“I am very pleased that the Ministry of Defence has welcomed the review team’s conclusions. The department has accepted the need for change, and it is now moving quickly to implement the majority of the report’s recommendations.

“I am continuing to work with the MoD on many aspects of the acquisition process, including implementation of agreed reforms, and in defining the way forward in areas where firm conclusions have yet to be reached.

“There is still a significant way to go to finish this work, and many difficult decisions lie ahead. Nevertheless, the MoD has made a very positive start, and I am sure that the department is determined to drive through this important work.”

Notes to Editors

1. The Bernard Gray Review of Defence Acquisition was commissioned by former Defence Secretary John Hutton.

2. Copies of the Gray Report are available on the Acquisition Operating Framework website - www.aof.mod.uk

3. More detail on the MoD’s response to the Gray Report, and the subsequent improvement programme, is included in the attached Written Ministerial Statement from Defence Secretary Bob Ainsworth.

4. For further information, please contact Beth Cowley in the MOD press office on 020 721 83255.

MINISTRY OF DEFENCE

Independent Review Defence Acquisition

The Secretary of State for Defence (The Rt Hon Bob Ainsworth): In December 2008, my predecessor asked Bernard Gray to undertake a review to identify improvements that we could make in the acquisition of Defence equipment. I am today publishing Mr Gray’s report and placing a copy in the Library of the House. I am very grateful to Bernard Gray for the effort he has devoted to this, the analysis he has produced, and for his support in developing with my Department proposals to implement many of his recommendations.

This is not a new issue. As Bernard Gray’s report highlights, all countries with significant defence capabilities face the same inherent complexities of military acquisition and – over many decades – have had to deal with cost and time over-runs. Indeed, as the report says, many of our allies are complimentary about the UK’s efforts to drive reform in this area and model their systems on ours.

In the last twelve years, we have implemented a succession of initiatives to improve acquisition processes, including “Smart Acquisition”, the Defence Industrial Strategy and more recently the Defence Acquisition Change Programme. These have had a significant impact on performance, as the National Audit Office has recognised in successive reports. At its best, my Department’s project management is very good indeed. As the report observes, there are dedicated people at all levels in the Ministry of Defence, and among our suppliers, with a strong commitment to ensure the Services have the equipment they need to deliver success on current operations and in the future. The system works best when the need is most urgent. We have successfully provided £4.1 billion worth of equipment to theatre in Iraq and Afghanistan through Urgent Operational Requirements since operations began. Our people, military and civilian, can be proud of that achievement. And the Service Chiefs have made clear that our service personnel are never asked to undertake missions unless we are fully satisfied that they have the right equipment to do the job.

However, the Gray report also brings out, through analysis of a sample of individual projects, the problems which still persist. These include not only the tendency of programmes to cost more and take longer to deliver than was initially estimated, but the further cost growth to which this gives rise and the pressure it places on limited resources – even in a period when the Defence Budget as a whole has grown substantially in real terms. It points to remaining skills gaps and to shortcomings in the existing arrangements for managing the equipment programme. And it argues for regular Defence Reviews to provide a strategic context for decisions on the equipment programme.

To some extent the difficulties we and others face in estimating the cost and time to deliver projects reflect the fact that much modern Defence equipment is at the leading edge of technology and is constantly having to adapt to meet evolving military requirements. Providing our Armed Forces with the best involves a degree of technological risk and uncertainty. But there are steps we can and must take, in the light of the Gray report, to build on earlier reform and deliver a radical improvement in performance.

First, I have already announced that we will undertake a Strategic Defence Review immediately after the General Election. Preparatory work is already underway, and I intend to publish a Green Paper early in the New Year. We will also examine legislative frameworks for implementing Bernard Gray’s recommendation that a Strategic Defence Review be conducted early in the term of each new Parliament.

Second, we will work to adjust our equipment programme to bring it into balance with future requirements and the likely availability of resources, through the current planning round and in due course the Strategic Defence Review.

Third, we will plan equipment expenditure to a longer time frame, with a ten year indicative planning horizon for equipment spending agreed with the Treasury, and will increase transparency by publishing that planning horizon and an annual assessment of the affordability of our programme.

Fourth, we have already strengthened Board-level governance within the Ministry of Defence by establishing a new sub-committee of the Defence Board, as recommended by Mr Gray, chaired by the Permanent Secretary as Accounting Officer and charged with determining, for agreement by the Board and Ministers, an equipment plan that is aligned with strategy, affordable and realistic.

Fifth, we will improve the way we cost projects in the equipment plan, using better and more sophisticated techniques applied more consistently, and ensuring that investment decisions are based on the most reliable available forecasts. We will also improve the management of risk across the programme.

Sixth, we will introduce stronger controls over the entry of new projects into the equipment programme, and over changes in performance, cost and timing of individual projects.

Seventh, we will sharpen the business relationship between Ministry of Defence Head Office, the Defence Equipment & Support (DE&S) organisation, and the Service Commands, by further clarifying roles and responsibilities, and by establishing new arrangements to provide greater visibility of project management costs in DE&S to the Capability Sponsor in Head Office.

Finally, we will accelerate the improvement of key skills (including in cost forecasting and programme management) in DE&S and the Ministry of Defence Head Office.

All of these changes are consistent with Bernard Gray’s main recommendations. I do not intend to take up his suggestion to establish DE&S as a Government-Owned, Contractor-Operated entity, to put it more at arm’s length from the rest of the Ministry of Defence. The Government has thought about this carefully, but we are not convinced that such a change would ultimately lead to better outcomes for the Armed Forces or Defence generally. Having the DE&S as fully part of Defence ensures a close working relationship with the military. Equipment acquisition is core business for my Department, and we have to get it right.

Based on these proposals, I intend to publish a wider, more detailed Strategy for Acquisition Reform in the New Year, to contribute to work on the Strategic Defence Review. I am delighted that Bernard Gray has agreed to work with us on this.

Thursday 15 October 2009

Contacts:

Ministry of Defence
NDS.MOD@coi.gsi.gov.uk

Geri Mahoney Moore
Phone: 020 7218 7958
geri.mahoney-moore113@defence.gsi.gov.uk