Have heard a Twitter rumour the affordable ten year equipment plan is all getting published tomorrow.
Tmr Defence Sec will set out a £160BN plan to equip #armedforces over the next decade.The affordability of plan has been endorsed by the NAO
— Sophie Bolsover (@SophieBolsover) January 30, 2013
A result of the SDSR, subsequent budget reductions, budget claw back, surplus raiding, Planning Rounds, Decision Points 1 through 4, the whiteboard exercise, the Land Capability List, the 3 month exercise, the Single Integrated Capability Planing List, Equipping for Contingency (bringing UOR into Core) and finally the Annual Budget Cycle (replacing the Planning Round) everything is rosy.
Except of course the thing with a ten year equipment plan is that it will be subject to at least one change of government and probably one SDSR, as we know, no matter what the MoD or anyone else thinks, the basic and unmovable principle of ‘a government cannot bind its successor’ applies.
Will update as things unfold but am out all day, talk amongst yourselves for a bit
DefSec will publish on Thurs 31 Jan a multi-billion pound plan to equip Armed Forces – the first of its kind #Equipment
— Ministry of Defence (@DefenceHQ) January 30, 2013
MOD 10 year Equipment Plan includes £35.8Bn on submarines and the deterrent, £18.5Bn on combat air, £17.4Bn on ships and £13.9Bn on aircraft
— Ministry of Defence (@DefenceHQ) January 31, 2013
MOD 10 yr Equip Plan includes £12.3Bn on armoured fighting vehicles, £12.1Bn on helicopters and £11.4Bn on weapons eg, missiles & torpedoes.
— Ministry of Defence (@DefenceHQ) January 31, 2013
Drop your linen and stop your grinnin’ (or is it the other way around)
There are two bits to this, a National Audit Office report and the Equipment Plan itself
The Equipment Plan forward from Philip Hammond, Sectary of State for Defence…
When I first took on this job, I recognised that establishing a sustainable equipment programme was absolutely key to delivering the vision set out in the Strategic Defence and Security Review—a vision of formidable, adaptable and well-equipped armed forces built on a foundation of balanced budgets, disciplined processes and an efficient and effective Department.
The previous Government left us a legacy of poor project management, weak decision making and financial indiscipline which added up to an unaffordable defence programme. To bring the equipment programme back into balance has required tough and difficult decisions. But those decisions were right and necessary. The best way I can support our Armed Forces, as they restructure and refocus themselves for the future, is to give them the assurance of stable and well-managed budgets and the confidence that the equipment programme is affordable and deliverable.
This report provides a summary of our future Equipment Plan, covering around £159 billion for new equipment, data systems and equipment support over a ten year period. The plan includes £8.4 billion of risk provision within individual project budgets as well as centrally-held contingency provision of £4.8 billion, and unallocated headroom totalling around £8 billion. This puts the Department in a strong position, with an affordable core Equipment Plan and the flexibility we need to be able to deliver our Future Force 2020 headmark.
The publication of this summary of the Equipment Plan is part of an ongoing commitment across Government to transparency. It provides more information on the Equipment Plan than has ever previously been published. I believe this report will help deliver greater efficiency within the Department and enable the Defence Industry to plan future investment with greater confidence.
Today, the National Audit Office are publishing their first independent assessment of the affordability of our Equipment Plan. I’m delighted the NAO have also recognised the significant progress we have made with the Equipment Plan and the positive steps we have taken to deal with the accumulated affordability gap. I also welcome the NAO’s guidance as to how we can further improve our processes in future years. I look forward to the NAO’s continued engagement in this process which, coupled with the transparency around publication of the Equipment Plan summary, will give Parliament and taxpayers a growing confidence in the robustness of the Defence Budget.
The second part is a National Audit Office report on the same subject
The report summary
The MOD’s ten-year Equipment Plan sets out its forecast expenditure plans to deliver and support the equipment the Armed Forces require to meet the objectives set out in the National Security Strategy over the ten years from 1 April 2012 to 31 March 2022. The Plan covers a budget of £159 billion. The Department has committed to publishing a Statement to Parliament each year on the cost and affordability of the Equipment Plan. The first Statement was published in January 2013. At the Department’s invitation, the NAO has reviewed the assumptions which the Department has used to compile the Equipment Plan. The NAO performed this work to assist Parliament in evaluating the confidence it can take from the Statement of affordability of the Equipment Plan as presented by the Department. Full details of the audit procedures undertaken by the NAO are given in Appendix One of the report.
Since the beginning of 2011 the Department has substantially revised the way it compiles and manages the Equipment Plan, and is now approaching the task on a more prudent basis. It has taken difficult decisions to address what was estimated to be a £74 billion gap between the Department’s forecast funding and cost of the defence programme as a whole and to try to bring the Equipment Plan itself into balance. These include cutting unaffordable expenditure and revising the way it compiles and manages the Equipment Plan to include greater contingency and provide greater protection to a core of prioritised projects, which will allow it to better manage cost variability.
The Equipment Plan is based on forecasts of costs and funding, representing the position at the end of the Department’s year-long planning process known as Planning Round 12. The Plan will inevitably change over time as economic and operational priorities evolve and as short-term affordability or urgent requirements cause the Department to flex its plans. For this reason, this report does not, and future reports will not, offer a definitive view on the affordability of the Equipment Plan. Rather, the NAO has constructed an affordability assessment model that breaks the Department’s assertions down into assumptions covering costs and funding against which the spending watchdog can test the realism of the Department’s approach. Of necessity, some time must elapse before performance against these matrices can be properly assessed. To increase confidence in the realism of its assumptions and the consistency with which its forecasts are calculated, the Department will need to demonstrate their reasonableness over a period of years. The Department does not yet have in place all of the necessary measures to do this. The NAO has set out in more detail the type of measures it would expect to see, in Appendix Two of the report.
This is the first year the NAO has undertaken this engagement and it was aware from the beginning of issues, detailed in the findings of this report, which would limit the confidence that could be taken from the Department’s Statement. In future years, as the Department’s approach to producing the Equipment Plan matures, the NAO intends to extend the scope of our work to cover progressively more elements of and assumptions included within the Equipment Plan. Notably, in agreement with the Department, this year the NAO has not performed any review of the Equipment Support costs, which make up just over half the Equipment Plan cost by value: £86 billion (54 per cent) of the total ten-year cost. This is because in preparing the Equipment Plan 2012-2022 the Department focused on increasing the robustness of its procurement costings, and has yet to apply the same level of challenge and review to the support costs element, although it plans to do so for the Equipment Plan 2013.
HIGHLIGHTS – THE EQUIPMENT PLAN
The report details equipment plans for each sector;
This sector covers fast jets, Unmanned Aerial Vehicles and military flying training, including procurement of training aircraft. This investment includes:
- continuing investment in Typhoon to bring Tranche 2 & 3 aircraft fully into service.
- Further investment to develop and enhance the aircraft’s multi-role and ISTAR capabilities are priorities for use of unallocated headroom in the plan budget;
- increasing investment in the Lightening II (Joint Strike Fighter) – a state-of-the-art fifth generation carrier capable aircraft, incorporating cutting edge stealth technology which, together with the Queen Elizabeth Class Aircraft Carriers, will deliver a high-end power
- projection capability for decades to come
- a growing investment in unmanned aerial vehicles, including through co-operation with France.
A priority for future investment when funds allow will be to expand our investment in simulated
This sector covers all large aircraft, including transport, air-to-air refuelling and large ISTAR platforms. This investment includes:
- The A400M future generation of strategic/tactical air transport aircraft;
- Bolstering our strategic airlift capability with the purchase in 2012-13 of an additional C17 to bring the fleet up to 8 aircraft
- The brand new Voyager transport and air-to-air refuelling aircraft, which will replace the VC10 and TriStar fleets;
- New Airseeker Intelligence, Surveillance and Reconnaissance aircraft to replace the Nimrod R1 and provide us with a state of the art airborne SIGINT collection capability;
In the later years of the programme we expect to make further investment in the latest technology to enhance and protect our Air Support fleet.
Our plans in this area include:
- The purchase of an additional 14 Chinook helicopters as confirmed by the Secretary of State in July 2011;
- Completion of the Life Extension Programme for Puma;
- A capability sustainment programme for our attack helicopters, to maintain the capability until 2040;
- The completion of the Wildcat programme, which will replace our existing Lynx helicopters, with separate variants for the Navy and Army;
- Continuing the Julius programme to upgrade the Chinook Fleet;
- Taking forward the Assessment Phase for work to address obsolescence and ship optimisation for the Merlin Mk3 helicopters. Continuing that programme into demonstration and manufacture is a high priority for future investment later in the decade.
ISTAR and Information Systems
We plan to spend some £15.7bn on ISS over the next ten years. This includes significant investment in Defence Information Infrastructure support costs and support costs for BOWMAN Tactical Communications and Information Systems.
We will be spending around £4.4bn on ISTAR programmes over the next decade. This excludes some significant platform spend, for example the new Airseeker aircraft which will replace the Nimrod R1 Intelligence platform, which is included within the Air Support area.
The main areas of spend cover deployable and fixed communications networks and services. This area also includes our CBRN detection and countermeasures programmes and a range of Special Forces Equipment. This is in addition to the considerable sums invested in this priority area through the UOR process, including the procurement of REAPER Unmanned Aerial Vehicles
Our planned investment includes: An upgrade to our fleet of Warrior Infantry Fighting Vehicles, to maintain that capability with enhanced lethality out to 2040 and beyond;
- Continued development of the family of Future Rapid Effects System (FRES) vehicles, including Scout and Utility variants, which will replace a wide range of legacy armoured and protected vehicles;
Further funding will be allocated in due course to cover the cost of bringing appropriate equipment procured for the Army in Afghanistan under UOR processes permanently into our core inventory, based on their future utility, current condition and the cost to recover and reconstitute them for further service.
Our plans in this area include:
- Completion of the two Queen Elizabeth Class aircraft carriers which, together with the Lightning II aircraft, will deliver a high-end power projection capability for decades to come;
- Delivery of the remainder of the 6 state-of-the-art Type 45 Destroyers with Samson RADAR and Aster missiles combining to offer an unparalleled air defence capability;
- Design and development of the Type 26 Frigate, which will replace the Type 23;
- Development of the Maritime Afloat Reach and Sustainability programme, which will provide a fleet of new, modern vessels for the Royal Fleet Auxiliary
Submarines and Deterrent
This covers all costs relating to the submarines themselves, nuclear propulsion costs and the costs of the strategic weapon system. This includes:
- The completion of the remainder of the class of 7 Astute attack submarines;
- Design, development and production of the replacement for the Vanguard class ballistic missile submarines, assuming that Main Gate approval is obtained in 2016;
- The ongoing costs of managing and maintaining the strategic weapon system, both missiles and warheads
The programme includes investment of around £7bn in the complex weapons sector which will deliver a wide range of weapons, in the short term including the Future Local Area Air Defence System, which will be based on the Sea Ceptor missile, and the Future Air-to-Surface Guided Weapon (heavy) which will equip the Royal Navy’s new Wildcat Helicopters.
Other elements of the Equipment Plan not individually broken down in this analysis total around £5.6bn including Naval Bases, Joint Supply Chain and Logistics & Commodities.
HIGHLIGHTS – NAO REPORT
- The plan covers the ten years from 1 April 2012 to 31 March 2022.
- The Plan covers a budget of £159 billion
- It has taken difficult decisions to address what was estimated to be a £74 billion gap between the Department’s forecast funding and cost of the defence programme as a whole and to try to bring the Equipment Plan itself into balance.
- The plan will inevitably change over time as economic and operational priorities evolve and as short-term affordability or urgent requirements cause the Department to flex its plans.
- For this reason, this report does not, and future reports will not, offer a definitive view on the affordability of the Equipment Plan
- To increase confidence in the realism of its assumptions and the consistency with which its forecasts are calculated, the Department will need to demonstrate their reasonableness over a period of years
- The Equipment Procurement Plan is composed of more than 400 individual cost lines relating to specific projects, most of which comprise thousands of assumptions based on technical and specialist knowledge.
- On an annual basis the project teams update the ten-year project costs using the cost forecast at the 50th percentile
- The Department has quantified the provision it has made for risk within projects for the whole Equipment Plan as £8.4 billion
- The inclusion of the contingency provision is a positive step that demonstrates the Department’s recognition of potential cost growth and the need to make greater provision for the materialisation of risk. The establishment of the contingency provision will increase the Department’s ability to manage cost growth in the programme without delaying projects
- However, for the reasons set out in paragraphs 20 to 30, we are concerned the amount may not be sufficient. If this proves to be the case then the Department would be able to use the £8 billion unallocated budget to protect the core programme, but this would have capability implications
- The overall affordability of the Equipment Plan is highly sensitive to changes in the assumptions about funding, which could be affected by changes to economic or political priorities. The unallocated £8 billion from the budget insulates the core programme from some of this sensitivity. However, any element of this expended on protecting the core would reduce the available funding for non-core projects, meaning the Department would have to find other ways of delivering capability or adjust its strategic objectivesthe Equipment Plan as presented does not include funding or costs for the return and ongoing support of equipment purchased under Urgent Operational Requirements from Afghanistan
Both reports make it clear there are three levels of contingency funding, all are over TEN YEARS
In the equipment programme there is £8.4 billion of risk funding, this is nothing new and even a casual glance at any NAO Major Projects Report will see risk funding coming and going as applied to individual projects
A new centrally held contingency fund of £4.8 billion which will be used to cover overspends beyond that covered by the individual project lines, the theory being that the previous practice of covering individual project overspends by grabbing money from others should stop
Finally, there is a sum of money, £8.4 billion, available towards the end of the decade that is for projects that are not in the core programme. This slush fund doesn’t start building until after 2016/17. The forces have their ‘wanted list’ called the Single Integrated Capability List which will change over time. I wonder if this will be used in place of UOR’s
The NAO clearly shows that even with these provisions, there is still, based on sound empirical analysis of past and current in flight projects, a high degree of optimism built into the assumptions.
In short, expect pain.
A FEW THOUGHTS
Expect the usual hubris from the Government and bitching from the opposition but the opposition make a very good point about the breakdown of the £38 billion black hole never having been released. I can’t see any national security interest in withholding the information and for the NAO to say ‘trust us’ is not good enough because the NAO only report on what the MoD tells them.
£38 billion you say, hang on a minute, we are up to £74 billion in this report.
Is this ‘pick a number’ hour, for this to have any credibility whatsoever it needs detailing or it simply becomes subject to a slanging match between the children in our lower house.
Defence becomes politics and politics becomes defence
The armed forces of this country deserve better, frankly.
Has the 1% increase in equipment funding come at the expense of the support and non equipment budgets?
One part of the report that I think will get drowned out in the shouting is that UOR equipment obtained for use in Afghanistan is not accounted for in this equipment plan.
Had to read it again, but it clearly states this to be the case.
It also makes clear that the £8 billion in unallocated budget will be needed to deliver Future Force 2020, which if it is used for going beyond what the NAO thinks is an unrealistic contingency provision due to the sensitivity and dependence on cost savings elsewhere, FF2020 will be under threat.
As for the actual equipment plan, doesn’t really contain any surprises and I am struggling to see anything on there that wasn’t on the table from the last Government.
So, its all good stuff and that, very interesting to see the MoD moving in the right direction but the proof of the pudding will be in the eating, just as those doing all the shouting today on both sides of the House will be doing different jobs.
If you look at the funding graph it has a whiff of jam tomorrow about it, the funding increase rises steadily post the 2015 general election and 2015 SDSR.
What was that about a conspiracy of optimism again?
In so far as it goes, this is a good piece of transformational transparent management (do I get ten points for that one) but the 1% increase in defence equipment spending is just a big fat con because;
- The Equipment Plan now has to support Successor, which as you should see from the numbers is much larger than any 1%, so in reality, it is a big reduction
- Non equipment and support costs are either declining or static, robbing Peter to pay Paul
- Fewer soldiers, sailors and airman means reductions in headcount which pays for the 1% increase
- It assumes that the next government will honour the commitment, good luck with that
All this wouldn’t be so bad if the Government stopped telling the fundamental SDSR lie about no strategic shrinkage and just fessed up to having to do less with less, a bit of honesty would go a long way to making it all more palatable.
In short, Dave, match your taste for intervention with the money to do so.