The Defence Reform Unit is being set up under Lord Levene to oversee the changes outlined in the speech below.
The DRU will work with the Permanent Secretary, Chief of the Defence Staff and the Service Chiefs to find ways of devolving greater responsibility for the running of the Services themselves.
Lord Levene will therefore have tremendous power and this will no doubt ruffle some feathers, which is always a good thing but what are his qualifications for the job of reforming the basket case that is the MoD that can quite happily spend money on dubious nonsense like diversity conferences, can’t even run its accounts without having them qualified by the NAO, repeatedly wastes money on farcical procurement programmes and until very recently could not even properly clothe its own soldiers.
From the Telegraph
London-born Levene was introduced to the City’s quaint customs while at school in the Square Mile, but rather than join the family silver business he studied economics at Manchester. “I wanted to go to Cambridge but I was too stupid,” he says, self-deprecatingly. Then at 21, he joined United Scientific Holdings, selling army surplus telescopes and watches on London’s Tottenham Court Road.
He built the 20-man firm into a major quoted company. “We went legit by buying real manufacturers,” he explains. Acquiring the Alvis tank business helped turn United Scientific from a MoD customer into a supplier and Levene so impressed defence secretary Michael Heseltine he was made head of defence procurement.
The scandals of the Tigerfish heavy torpedo and Nimrod AEW aircraft bought about by inadequate ‘cost plus’ contracts led to the appointment of Levene as Chief of Defence Procurement in 1985. Like a new broom sweeping clean Levene revolutionised the procurement processes in the MoD. A much more adversarial and commercially hard nosed culture was introduced, gone were cost plus contracts and in came fixed price contracts with severe restrictions on the interaction between the MoD and suppliers once the contract had been awarded.
This limited interaction meant that opportunities for scope creep were reduced, scope creep being anathema to fixed price contracts. It also meant that any government funded research into relevant technologies could not be fed into ongoing programmes and led to the rise of the commercial, rather than technical skills family.
Behind these reforms was a fundamental misunderstanding of the reality of defence programmes, whilst fixed price contracts might be OK for spare tyres or ammunition, they are wholly unsuited to complex programmes where there is significant technical risk and the dogmatic approach lead to an increasingly fraught relationship between the MoD and industry. Because of the need to nail down every aspect of a requirement, requirements documents and contracts grew increasingly complex and tested the capabilities of the MoD, competitions became slow and unwieldy which damaged both the customer and industry.
Open competition and fixed price bidding also encouraged under bidding and this became endemic as almost every contract was bid low. Cost and time overruns were as common with this method as before as fixed price contracts were always renegotiated after the fact and any cost savings, however they were trumpeted as a success, were in the vast majority of cases, achieved by de-specifying, delaying and reducing quantities.
Nothing very clever about that.
If a fixed price deal stays the same but delivers less, it isn’t really a fixed price deal and political and regional interference made a mockery of this approach anyway, step forward Westlands.
A number of serious scholarly research papers exposed the impact of this approach not only on the MoD but industry as well, the approach massively favoured US manufacturers because whilst in this brave new world of competitive tendering and fixed price deals UK companies had to compete with others, mainly the US, who benefited from US government funded research programmes. There is a very good reason that US systems appear to be cheaper, that is because they have a much larger market in which to generate economies of scale and benefit from a government funded research environment that dwarfs that of the UK.
The net result of the Levene Reforms was a transference of risk from the MoD to industry, industry responded to this by merging and entering into partnerships that would have the critical mass to accept these risks.
US companies started making serious inroads into the UK defence market, like General Dynamics for example, winner of the recast BOWMAN contract in 2001. The old situation where we had a small number of companies that made the same things has been replaced with a situation where we have an even smaller number of companies that still make the same things, only more expensive. The desire to increase competition resulted in less of it.
Faith in market forces as the saviour to the MoD’s acquisition woes was completely misplaced, buying complex military equipment is simply not the same as buying paper clips.
When the Labour government came to power they inherited a much worse situation than they left, many people conveniently forget that in the rush to call the MoD not fit for purpose. In 1998 the Levene Reforms were cast aside in favour of Smart Acquisition where the less adversarial approach of partnering was introduced.
In evidence to the Defence Select Committee in 2006, Lord Levene argued;
“we did get value for money. We did get projects, almost without exception, delivered on time and on cost”
The National Audit Office reports on major projects for that and subsequent periods paint a somewhat different picture, in reality, lower costs were produced by less quantity and lower specification.
What of the others in the DRU?
Baroness Sheila Noakes, George Iacobescu, Dr David Allen, Björn Conway, and Raymond McKeeve
- Baroness Sheila Noakes, conservative politician and formerly head of KPMG’s government practice.
- Björn Conway is head of aerospace and defence at Ernst & Young
- George Iacobescu is the Chief Executive of the Canary Wharf Group
- Not sure about Dr David Allen and Raymond McKeeve but from initial research, I think the latter is a lawyer
An interesting group, obviously high performers in their respective industry sectors but a little light on military or security expertise. Maybe this isn’t a bad thing and having experience of transformational programmes in other large organisations is exactly what is needed.
Can’t help feeling a little dejavu about this though.
You might also want to have a read here but I will leave you with these two statements from the new man in charge of Defence reform, the Chairman of General Dynamics UK and former President of the Defence Manufacturers Association.
“We are delighted that the MoD has selected ASCOD SV for its SV programme, a decision we believe will sustain the British tank industry for future generations!
“WATCHKEEPER is a central program to the future ISTAR growth strategy of General Dynamics U.K. Ltd, and is viewed as an essential project in shaping the direction of our organization and the synergies with our existing U.K. business is clear”
“The old situation where we had a small number of companies that made the same things has been replaced with a situation where we have an even smaller number of companies that still make the same things, only more expensive. The desire to increase competition resulted in less of it.”
Very nicely done piece, boss. Having the General Dynamics UK boss in charge does sound a little like foxes and henhouses (just of a different sort than Big And Expensive’s monopolistic approach.) That first quote? That would be irony. Appreciate the nice synthetic (that is, synthesized) overview of the changes in process.
Where the UK can’t compete on economies of scale (not since the Seventies at least) government-cultivated research really does seem like a pivot point. How about a one-two approach: 1) recapture DERA as a government agency because it was that rare beast that actually generally did just what it was supposed to on a relatively small scale and with value added rather than sunk, and 2) see about creating a government-run lending institution, one that’s funded by a tax on financial paper (play in the Square Mile, pay for its defence), and micro-lends for reliable development streams on UK defence design programs.
“WATCHKEEPER is a central program to the future ISTAR growth strategy of General Dynamics U.K. Ltd, and is viewed as an essential project in shaping the direction of our organization and the synergies with our existing U.K. business is clear”
‘Synergy’ it’s one of my favourite words in bullsh*t bingo!
Synergy is a ten pointer for sure, if you can get holistic in the same sentence as synergy though, you know you are a zen bullshit ninja!
Jackstaff, selling off QinetiQ was criminal and one only has to see the the Haddon Cave enquiry to see how criminal
AH! BullSh1T Bingo, used to love playing that at work. It was great fun at swankey corporate presentations.
Synergy was one of the big, we also liked:
Parachuting in (well I did for obvious reasons)
Devil in the Detail
And the absolute BINGO…
Paradigm Shift….
BINGO!!!
@Jackstaff: Agree totally that DERA shouldn’t have been sold off. We could build back up from DSTL, the rump that stays in govt ownership? Maybe a DERA-ish replacement could act as an IP repository of MoD/Public research – free for UK registered companies to access, but paid-for for friendly overseas ones. The system could work in reverse for projects designed and built specifically for the UK, IP from the project is held by DERA-ish, for use in upgrading and re-roling equipment. Just a thought.
@Phil: In my industry, anything with “change” in the phrase gets a full house – Change Management and Change-Led-Business are the examples that get the bullsh*t-ometer working over time!
Phil and Dave
The ‘Holy Grail’ of bullshit is getting holistic, synergy and paradigm shift in one slide. I have witnessed this but once in my long bingo career and I instantly recognised I was in the presence of a bullshit ninja.
It was in a big room, full of strangers so I bottled it and failed to stake my claim!
Hey people,
What do you think of all the recent murmurings of a shift to four month deployments, as a way of reducing the stress imposed on the air-bridge generated by all those r&r flights required for mid-term breaks on six month deployments?
Would it make sense to shift to a four month rotation wholesale?
Tail wagging dog
We should be concerned with improving our strategic transport capabilities rather than reducing deployment times, one of the key issues with 6 month tours is the time spent as a proportion of the whole on getting used to the local situation and settling in, then handing over.
4 month tours will make this worse
The six month deployments are causing problems that four months would make worse.
http://defenceoftherealm.blogspot.com/2009/12/drop-dead-donkey.html
cheers guys, though i am unsure how your link relates to the question Dominic?
Constantly rotating our personel robs them of any real operational experience and knowledge.
So enemy standard practice beomes “new” every 6 months, or every 4 if we shortern terms.
Not that I have a reasonable solution.
In the past, we’d have raised armies from the locals with the British Army providing the Officers and NCO’s on extended (IE 5 year plus) terms.
I’d like to pose a question on contracting approach which I’m going to caveat by saying I’m no expert on commercial dealings….”Would contracting for time+performance be better”
One of the primary reasons for cost increases on programs is over-running programs so instead of contracting against cost and performance why don’t we contract against time and performance, i.e. pose the question to industry as to what capabilities they can develop and deliver in for example 5 years for a new vehicle. Now obviously you couldn’t give industry a blank check book but you should still be able to encourage innovation by setting challenging performance and time scale requirements (i’m thinking LPPV here). Thoughts please, have I been spending too much time in the sun?
gotcha dominic, cheers.
Admin and Phil,
I have seen the holy grail achieved once, and believe I saw at least two or three immortal souls of audience members pucker and implode when it happened. Been off on holiday, and had to mention the surprised fellow one screen over from me in a hotel wifi lounge when I burst out laughing at “bullshit ninja.” There is, I truly believe, a class of consultant who have this written in UV ink on the back of their cards, so that executive VPs can decide who to hire for “corporate visioning” conferences. Seems like, among the lighter-side postings, a “Bullshit Ninja of the Month Award” would be well in order, what with all the eager new brooms running around MoD and the Parliamentary committees these days.
Dominic and JBT,
Six-month tours are themselves too short functionally, too. And since nine-month rotations would be both fairly hellish in the environment (ask the Yanks and, iirc, the Canadians who both drag it out for a year) and logistically brutal, let this make the practical case that it’s time to go the hell home. The US can call up for a spot of support if needed when it wants to kill someone useful to the nobbling of AQ. Beyond that this has reached the “pissing on your own leg to keep the ants off” stage of counterinsurgency.
All future UK defence research and development should all be outsourced away from the MOD defence budget. It has always been costly for little return. The MOD can then be able to make proper savings in the long run to go to front line services that matter most and also help reduce the black hole that the MOD currently has.
I do not know if the famous filament was worth £22, or indeed if MoD was screwed for the £120 bolts, but – if they were overpriced – isn’t it ever so interesting that the man who developed the “compete it and self evidently it is value for money” and NAPNOC systems is the one appointed by Dr Fox to reform MoD?