Released this week with little fanfare or reporting in the mainstream media was a progress check on Defence Reform, commonly known as the Levene reforms after its main author, Lord Peter Levene.
It is exceptionally boring stuff but vitally important because without a well run MoD the services will be unable to deliver against their obligations.
This would also be the second set of Leven reforms because Peter Levene was appointed by Michael Heseltine in 1981 as a personal adviser and then as Permanent Secretary in the role of Chief of Defence Procurement at the newly formed Procurement Executive, a post he held for six years. In 1999 the Procurement Executive was replaced with the Defence Procurement Agency as part of the Labour Governments 1998 Strategic Defence Review.
Following huge cost and time over runs on the Chevaline re-entry vehicle for Polaris, Tigerfish torpedo, Foxhunter radar, Type 23 Frigate and the spectacular issues with Nimrod AEW a series of reforms were announced in 1983. These were in response to stinging criticism by the National Audit Office and House of Commons Defence Select Committee and were to be characterised by increasing use of competitive tendering, fixed price contracts and significant organisational changes at the Procurement Executive.
The cancellation of Nimrod AEW and the purchase of the US E3 Sentry was seen as a sign of change.
Michael Heseltine deserves much credit for starting the MoD onto the road to financial reform, even if that journey has been bumpy and far from over. It all started with his controversial appointment of Peter Levene, the then Chairman of United Scientific Holdings. It was controversial at the time (apart from the expected resistance to change from the old school entrenched civil service and military staff) because he was an outsider and his salary of £107k plus benefits was to put it mildly, a lot at the time. Despite the criticism, Michael Heseltine and Peter Levene persevered and many at the time ignored the fact that Peter Levene took a considerable cut in salary to join the MoD.
The MoD stated that the introduction of greater competition and an end to cost plus contracts saved the MoD 10% on its equipment projects over the following ten years a 1994 study by Dr Steven Scholfield of the University of Bradford questioned that, showing that the savings were no nowhere near that, most of the evidence somewhat flimsy and where savings were made it was due to reducing quantities.
Competition became increasingly illusory as defence equipment manufacturers consolidated.
The 1998 Strategic Defence Review introduced another round of reforms including a renaming of the Procurement Executive to the Defence Procurement Agency, introduction of Integrated Project Teams, longer term support contracts, partnering and Smart Procurement (Acquisition) which took a whole life view of defence equipment costs.
Six years later, the Public Accounts Committee had this to say;
Six years since the introduction of Smart Acquisition, there is still little evidence of the Department having improved its performance in delivering projects to cost and to time. Smart Acquisition is at risk of becoming the latest in a long line of failed attempts to improve defence procurement
A couple of decades of ‘defence reform’ have seemingly had limited impact on the ability of the MoD to waste money on a truly epic scale. This might be hugely unfair because the MoD’s hands are often tied by political expediency and the ‘British Jobs’ argument. Despite the intent of the original Leven reforms to introduce true competition that goal has been elusive. However one might try and square the circle of maintaining British jobs in strategic industries with competition the simple fact remains they are at odds, no amount of defence industrial strategy documents can change that.
Which, brings us up to date with the latest in a long line of defence reforms
The report had 53 recommendations.
The table shows progress against those 53.
One of the key issues in defence equipment cost inflation that has been recognised for many years is staff churn. The two year posting cycle for both military and civil service personnel, projects, especially the complex ones where cost inflation means a big number, suffered from a lack of continuity.
A year after Peter Levene started work at the MoD the US Navy Admiral Hyman Rickover, the person responsible for nuclear propulsion, safety and often called the ‘Father of the Nuclear Navy’ delivered a speech at the University of Columbia that encapsulated his philosophy.
Most people have never heard of Admiral Rickover but his impact and subsequent influence in high complexity mission critical organisations has been nothing short of massive. His view was that it was people not management systems that delivers outputs and those people must be at the core of the overall approach.
Accountability and authority are needed at all levels.
You can read the full speech here but a key part on continuity is;
Complex jobs cannot be accomplished effectively with transients. Therefore, a manager must make the work challenging and rewarding so that his people will remain with the organization for many years. This allows it to benefit fully from their knowledge, experience, and corporate memory.
The Defense Department does not recognize the need for continuity in important jobs. It rotates officers every few years both at headquarters and in the field. The same applies to their civilian superiors.
This system virtually ensures inexperience and non-accountability. By the time an officer has begun to learn a job, it is time for him to rotate. Under this system, incumbents can blame their problems on predecessors. They are assigned to another job before the results of their work become evident. Subordinates cannot be expected to remain committed to a job and perform effectively when they are continuously adapting to a new job or to a new boss.
When doing a job – any job – one must feel that he owns it, and act as though he will remain in that job forever. He must look after his work just as conscientiously as though it were his own business and his own money. If he feels he is only a temporary custodian, or that the job is just a stepping stone to a higher position, his actions will not take into account the long-term interests of the organization. His lack of commitment to the present job will be perceived by those who work for him, and they, likewise, will tend not to care. Too many spend their entire working lives looking for the next job. When one feels he owns his present job and acts that way, he need have no concern about his next job.
The 1998 SDR explicitly recognised staff churn as a problem and sought to create;
a new specialist stream of acquisition personnel in the MOD, a cadre of both civil and military staff, who will be specifically trained and spend much of their careers in the procurement field
The latest Defence Reform also recognised the issue but went further to recommend;
12C. The Department should move to a model where most individuals stay in post for longer and the most senior civilian and military posts are held, as a rule, for 4 or 5 years
This has been marked as delivered, as each new incumbent takes up their post.
Why, amongst the plethora of recommendations, have I focussed on this one?
I thought this recent Parliamentary Question from Jim Murphy was particularly relevant;
Jim Murphy (East Renfrewshire, Labour) To ask the Secretary of State for Defence how many members of the armed forces have worked in defence procurement in his Department for a period of two years or more.
Given the focus and the ‘delivered’ status of the Levene Recommendation 12C, one might have thought the answer would have been, ‘loads of them’
Philip Dunne (Ludlow, Conservative) Information on the number of armed forces personnel that have worked in any aspect of defence procurement for over two years is not held centrally and could be provided only at disproportionate cost. In terms of those armed forces personnel currently employed in Defence Equipment and Support, of 3,817 posts, 18 have served in their current posts for two years or more as at 30 November 2012.
Defence reform fatigue perhaps?