Britain Releases Defence Equipment 2008 Report

(click for full report)

The UK’s Parliamentary Defence Committee has released its 2007-08 Session report that looks at the UK’s new merged Defence Equipment & Support organization (formerly DPA and DLO), and assesses Britain’s major procurement programs. The “Tenth Report of Session 2007-08, Defence Equipment 2008, HC 295” offers conclusions on a number of fronts, beginning with this general philosophy and then moving on to specific programs:

“We note that the MoD is preparing advice to Ministers about the defence budget for the three years 2008-09 to 2010-11 and that the MoD acknowledges that there are likely to be cuts or delays to projects in the Equipment Programme. The MoD needs to take the difficult decisions which will lead to a realistic and affordable Equipment Programme. This may well mean cutting whole equipment programmes, rather than just delaying orders or making cuts to the number of platforms ordered across a range of equipment programmes. While it is the natural inclination of all governments and departments to avoid bad news by “moving programmes to the right” rather than by cutting out an entire capability which has many supporters, such an approach can cause in the long run more financial and operational damage than confronting the perennial problem of an over-ambitious Equipment Programme. A realistic Equipment Programme will give confidence to our Armed Forces that the equipment programmes that remain will be delivered in the numbers and to the timescale required, and will also allow industry to make informed investment decisions.”

With respect to individual programs and issues:

Organizational

• The 2007 merger of Britain’s Defence Procurement Agency and Defence Logistics Organization into Defence Equipment & Support has generally gone smoothly, is ahead of schedule in some areas, and is expected to generate annual net cash-releasing savings of some GBP 250 million by 2010-11.

• The MoD expects that their “future contracting for availability” partnership approach to fleet maintenance will lead to a more highly skilled and paid DE&S workforce, but a smaller one as some roles move to industry. The goal is a reduction of about 27% – 7,500 staff – by 2012.

• On the flip side, additional training for that workforce has been a problem, due to urgent operational demands that make it hard to find the time. The Commiittee notes: “We consider that it is inexplicable for the MoD both to be reducing the numbers of staff and to be telling those that remain that there is no time to train them”. It also expresses concern that DE&S currently has no plan in place to retain highly-trained staff, who tend to be more marketable and hence more likely to find other opportunities when layoffs threaten or buyouts are offered.

• Performance metrics for DE&S are another issue. Whereas the DPA had its targets reviewed by the UK’s National Audit Office, DE&S only plans to have its targets reviewed by the Defence Management Board. This has raised concerns in Parliament, even as the committee applauds DE&S’ decision to benchmark its record of delivering equipment into theater against allies.

• Up until December 2007, 796 Urgent Operational Requirements (UORs) had been approved, to a value of GBP 2.4 billion. A total of 219 UORs were approved in 2006-07 (124 for Afghanistan and 95 for Iraq) at a value of GBP 793 million. As at January 2008, the total cost of UORs approved for Afghanistan and Iraq was over GBP 3 billion, and the MoD had brought 44 UORs which originally cost GBP 230 million into its core procurement programs at the end of their one-year term.

• While even urgent requirements can take over 12 months to field, the Committee praised the improvements UORs have brought over past experiences, and believes there are some important lessons which can be applied to mainstream equipment procurement.

Specific Programs

• Programs that experienced further scheduled slippage in 2007/08 include the Nimrod MRA4 maritime patrol aircraft (+3 months, to +92 months; program was on hiatus for a while), A400M tactical transport aircraft (+9 months, to +24), Soothsayer Land Electronic Warfare system (+4, to +12 months), Watchkeeper UAV (+7 months, but still under its target and interim leased versions operating right now), Terrier AEV (+27, to +36 months), RB57 NLAW (+15, to +27 months), Paveway IV dual-guidance Precision Guided Bomb (+12, to +9 months).

• Programs that have seen significant cost growth and schedule slippage since inception include the SSN Astute Class submarine (GBP +1.22 billion, +41 months, expected to enter service in Nov. 2008), Type 45 air-defense destroyer (GBP +989 million, +36 months, expected in service Nov. 2010), and Nimrod MRA4 (GBP +787 million, +92 months, expected in service Sept. 2010).

• While the UK has discussed 150 F-35B Lightning II STOVL aircraft for its carrier force, that is not a firm commitment, and the exact number is still up for discussion.

• The Royal Navy no longer believes that they will have a carrier’s worth of 36 fully equipped and operational F-35Bs in 2014, however, when the first 65,000t CVF Queen Elizabeth Class aircraft carrier is expected to be ready. In response, the UK MoD plans to keep the Harrier GR9 in service until around 2018, 2 years after the second ship of class Prince of Wales is expected to enter service. F-35 testing risks remain, and likely American reductions in their early buys would raise the price of each export aircraft by forcing buyers to buy earlier in the production cycle. Accordingly, the Defence Committee continues its insistence on a ‘Plan B’ for the UK MoD in case enough F-35s can’t be available in time (now expressed as 2018, rather than carrier in-service dates) at an acceptable price.

• The MoD considered that the problems on the SSN Astute Class fast attack submarine programme were a consequence of not having ordered a submarine for 10 years, during which design moved from scale models to computer-aided design. The Committee describes 2 of the key lessons from the Astute submarine program, and adds that: “We consider it vital that these lessons are taken into account when the MoD acquires the successor to the current [SSBN nuclear missile] Vanguard class submarines.”

• The UK’s FRES medium armored vehicle program was changed to a more off-the-shelf approach, with a competition in September 2007 featuring wheeled armored vehicles (France’s VBCI, GD MOWAG’s Piranha V, and the ARTEC Boxer that Britain had originally abandoned to pursue FRES. Nevertheless, the report says that the FRES Utility contender which has been recommended is a “developmental vehicle” that will be use as a base platform, not an off-the-shelf purchase. The Committee acknowledges the potential advantages, but also notes the potential risks. Given the program’s multi-billion pound size, continued scrutiny is to be expected.

Other Procurement Issues

• As is true in the USA with its RESET program and maintenance overhang, high rates of operational equipment use and the need for subsequent maintenance and recapitalization are now acknowledged as a growing issue in Britain. Britain is substantially behind the USA in this regard, however; the question is just now being looked at seriously as part of Britain’s budgetary planning round to 2011.

• Lack of control over the timelines of international projects like the A400M, Meteor missile, Typhoon, and F-35 was expressed as a concern. This is always an issue, as the decisions of other participants can and do delay the programs. As more of Britain’s programs become international joint efforts, however, the problem is expected to grow. “We call on the MoD to set out in its response to this report what conclusions it draws from this problem about the nature of international programmes, what steps it has taken in the past to limit these disadvantages and the extent to which these steps have been successful.”

• DID observation: Costs, Delivery time, Requirements – pick any 2 to control. Britain seems to be putting greater weight on cost and requirements control, which leads to greater risk of delivery time slippage. Barring some change in overall policy, or challenging projects like the SSN Astute and Nimrod MRA4 that are driven primarily by industrial policy needs, schedule slippage is likely to remain the defense project safety valve of choice in Britain.

Procurement Policy

• As a general approach, the UK MoD is moving toward new “equipment which meets the vast majority – around 80% – of the military customer’s requirement, but which also has an ‘open architecture’ allowing incremental upgrading and innovation to be added later.” The Committee adds that this “appears to be a sensible approach,” as long as the requisite through-life management and project management skills are in place, and the discipline to stick to the approach is present.

• Earned Value Management (EVM) is used in the United States on equipment projects as it is a requirement of the Department of Defense. The MoD is now using the technique on the Astute submarine and Nimrod MRA4 programmes (likely as part of the project recovery process), and plans to use it on all equipment projects.

• In an interesting variant on cutting-edge “critical chain” project and program management approaches, which aggregate task time buffers to the central project level, the Committee believes “is a strong case for having a general procurement contingency [fund] held centrally by the Equipment Capability customer rather than at the individual equipment project level.”

Additional Readings

• UK House of Commons Defence Committee (March 11/08) – Tenth Report of Session 2007-08, Defence Equipment 2008, HC 295 [PDF, 116 pgs]. See also the accompanying March 27/08 media release.

• UK MoD (March 27/08) – Baroness Taylor responds to report on equipment

• DID FOCUS – Britain’s Future Contracting for Availability Approach