Defence IssuesSpeech by Minister (DP) Lord Drayson to the RUSI Defence Project Management Conference 2005
 |
|---|
| Lord Drayson, Minister for Defence Procurement |
Back in May I welcomed the National Audit Office Report - Driving the Successful Delivery of Major Defence Projects - which underlines our commitment to constantly improving the way we manage procurement projects. At our best we are delivering first class projects which compare very favourably with both private and public sectors. In similar vein I welcome, on the whole, the Public Accounts Committee report last week into the MOD's major procurement projects and the conclusions and recommendations contained within it, especially the Chairman’s acknowledgment that we consistently make the grade when it comes to delivering the quality of equipment to our Armed Forces against their key user requirements. Those who take the trouble to read it – as opposed to some of the more sensational headlines by commentators – will find significant improvements since 2003. Although we are good at meeting defined capability requirements, the PAC did criticise us for poor performance on delivering equipment to time and to cost. As a result of the previous Major Project Reports we have set the DPA key targets to reduce time and cost overruns on 65 projects which each cost over £20M. We need to focus on those projects and deliver improvements.
The targets we have set for 2005-06 mean that time delays must be cut to an average of 0.7 months and in year cost slippage to 0.4%.
We have cancelled projects in the last two years where they have not meet the capability required, not been affordable, or value for money. Cancelling projects, although painful, is better than letting failing projects run on – no matter how much criticism this may cause us.
This conference is all about delivering successful projects and defining the characteristics of successful project teams. It is absolutely right that we recognise and learn from our successes. However, we’ve also learn from our failures. Improving acquisition performance is the major challenge for any Minister for Defence Procurement.
Some of you may have heard me speak at the RUSI conference last month entitled Military Capabilities in the 21st Century. During the conference I referred to our work in producing a Defence Industrial Strategy. This is currently my number one priority and I would like to update you on how this is progressing. It is itself a good example of project management in action in that I’ve promised to deliver it by Christmas.
Building on the Defence Industrial Policy published in 2002, the Strategy seeks to provide an understanding of which technologies and industrial capabilities are important for us to retain in the UK for Defence. This understanding is vital if we are to ensure that the capability requirements of the Armed Forces can be met, now and in the future. The Defence Industrial Policy provided an indication of how this issue might be addressed but did not provide the detail that sought – including the key question of how its principles were to be applied in practice.
The Defence Industrial Strategy will provide that detail and will represent a major step forward in providing industry with greater clarity about the future direction of MOD’s capability requirements allowing industry to make informed, long term investment decisions. Now this is a significant challenge but one which it is absolutely essential to address now. I am committed to ensuring the Strategy is delivered by the end of the year.
It is clear to all of us that at a time when our Armed Forces are actively deployed on operations around the world that the priority of the Defence Industrial Strategy must be to ensure that we provide them with the equipment that they need, at best value for money for the taxpayer. I should be clear this is not being interpreted narrowly as the best short term value for the defence budget, if that implies project-specific short-sighted decisions. The DIS is about giving a long-term framework. This long-term perspective is key to the whole thing. This means we have to take difficult decisions as there is only so much money available for Defence. So any time MOD buys something from the UK where an equivalent, cheaper alternative product is available abroad, that means that the Armed Forces either get less, or worse, equipment than they otherwise would have had. Unless there are valid Defence reasons for taking a broader view of the relative value for money, that is not a position the public should or will accept, particularly while our forces are heavily engaged in operations as they are today in Iraq.
So today’s conference comes at a crucial point in developing this Strategy. The work is being taken forward across Whitehall at a brisk pace and we are involving stakeholders from Defence Industry and the broader community throughout the process. A methodology for capturing the key technologies in each sector has now been agreed by a joint Industry/MOD working group. Two workshops have happened this month in each of the key industry sector. These workshops enable us to identify those industrial capabilities and technologies that we believe are required to be sustained on-shore to maintain appropriate operational sovereignty. Where the work indicates that these are at risk, we will then seek to identify suitable options to retain the necessary capabilities in the UK taking a long term view. Other areas of the Strategy are also being urgently addressed. This includes work being led by the Department of Trade and Industry on the Business Environment in the UK, which will provide an understanding of the industrial context for the Defence Industrial Strategy. We are also addressing questions on how value for money is assessed by the Department and how we design procurement strategies that recognise and take into account industrial issues. In just the current fortnight we have involved well over 70 representatives from industry covering over 50 businesses.
However, if we are get this right it is vital that we also recognise the need for change. Implementing the Strategy will not be successful unless there is an recognition across the defence acquisition community – and I explicitly include industry in this – that a commitment to change is essential. As Leo Tolstoy put it, "Everyone thinks of changing the world, but no one thinks of changing himself".
It is important to recognise that the nature of acquisition is evolving. Its getting tougher. Closer engagement between MOD and Industry on driving performance improvement is now vital. The pace of technological change, the growing role of incremental acquisition and the shift towards the delivery of integrated capability rather than equipment projects all present challenges that we need to face together.
For our part we understand that we need greater openness with Industry to ensure more informed investment decisions by defence companies. Successful projects depend on not just on getting the processes right but getting the culture and behaviours right too. When a decision is made to partner with Industry on a particular project, it must be with common objectives, a willingness to share information and in a spirit of openness and transparency. These are good words… but we also need to recognise where our motivations, incentives and cultures differ – and to manage and respect these differences.
Within the Ministry of Defence, our Smart Acquisition approach has been running for 7 years and it is good to see many areas matching up to the NAO `gold standard’ criteria for project control.
Smart Acquisition remains our long-term strategy to improve the way we acquire military capability. Its principles remain valid today and it is good to note that the National Audit Office, in its Major Projects Report 2004, cited several successful examples of Smart Acquisition principles being applied in practice, such as the innovative Short Term Strategic Airlift solution of leasing C-17 aircraft to meet the In-Service Date and the effective management of trade-offs on Sonar 2087. However the consistent application of Smart Acquisition principles across the board remains an issue. At present the application of these principles is patchy.
I have, as with the Defence Industrial Strategy, made a personal commitment to provide clear leadership in pursuit of delivering acquisition reform. With a responsibility for £16 billion of public money for procurement and support we have to succeed in providing what our men and women in the frontline need while also providing the British taxpayer with the value for money which they expect. Consistent application of Smart Acquisition principles will deliver this.
The Acquisition Policy Board, which I chair, provides strategic direction to defence procurement and is responsible for ensuring we have the right policy and processes in place to deliver successful projects. I intend that we will address culture and behaviours through this forum.
I have led an initiative to provide a set of values and behaviours, to be applied across the acquisition community in both the public and private sectors. These values will drive the way in which we will deliver the right equipment and services to the front line. I want to make it clear to you that, as the responsible Minister, these are values which I expect to shape the behaviour of all those involved in Defence acquisition – they are also the values I intend to adopt personally. I would now like to focus on some of these now which I believe are particularly important for me – I know that later on today Ian Andrews will be talking about the values in greater depth.
At the top of the list is "recognise that people are the key to our success; equip them with the right skills, experience and professional qualifications". Many of you will know that I came from the bio-tech industry, an industry which relies on the successful delivery of long term complex projects in a rapidly developing environment. At the heart of the successful projects in the companies I have run were a set of motivated people, with the right skills and experience to deliver. The same is true in defence. In the Ministry of Defence we recognise that reform to acquisition processes must be matched by incentivising the right behaviours, using enhanced delivery skills and by personal accountability for delivery. We intend to address concerns over our shortage of project delivery skills to ensure we develop the right people with the right skills and are able to attract and retain the best staff. This will be taken forward as part of our Civilian workforce and Service Personnel plans.
Moving on "Recognise and respect the contribution made by industry; seek to share objectives, risks and rewards while recognising that different drivers apply; and "value openness and transparency; share future plans and priorities wherever possible to encourage focused investment and avoid wasted effort"; the HMS Illustrious Refit Team adopted a highly successful partnering approach with its supplier [Babcock BES], based on shared values and behaviours underpinned by an innovative commercial structure. Illustrious was a 30 month, £120M refit which resulted in savings shared between partners of which the MoD saved £1M, delivered under budget by £2.1M and one day early at Fleet Date, work actually being completed with the Upkeep period.It delivered an extensive upgrade package within an ambitious timescale and came in under budget, enabling the savings to be re-invested in additional upgrades to the ship in the refit. This model captured the essence of this approach in a partnering Maturity model for more widespread use across the acquisition community. The NAO also cites this as a good practice example in its Report under discussion today - Driving the Successful Delivery of Major Defence Projects. I have visited Illustrious and seen for myself the brilliant job the team has done, including the significant engineering challenge of removing the gear box from the side of the ship alone was a remarkable feat of ingenuity.
And finally two important values: "value objectivity based on clear evidence rather than advocacy; ensure that we capture past experience and allow it to shape our future behaviour"; and "realise that success and failure matter; we will hold people to account for their performance". These are behavioural and leadership values which I intend to pursue vigorously through the Acquisition Policy Board. In the past we have not always got it right. Earlier this year the House of Commons Public Accounts Committee reported that the procurement of battlefield helicopters was one of the worst examples of equipment acquisition it had seen. This procurement preceded the introduction of Smart Acquisition and among its recommendations the Committee stated that "the Department should examine all such projects on a case by case basis to ensure that Smart Acquisition principles are implemented consistently and with vigour." This we have been doing and through these values are being embedded into our behaviour we expect to really make a difference. Recent Major Projects Reports give other examples: the Type 45 destroyer 18 month slippage due to a prolonged design phase and 11 month slippage due to technical problems on the Typhoon Aircrew synthetic training aids. I could go on.
The Defence Values for Acquisition are fully set in context in the latest issue of The Acquisition Handbook, available from today as a download from the MOD website – I have a few copies `hot off the press’ here today.
But reform does not happen through glossy publications alone. It requires committed and determined people with the right leadership, training, incentives and rewards, process and structure. I am committed to making this happen and my department will rise to the challenge – with your help and involvement.
Of course, working in accordance with the values we have set ourselves for Acquisition will be difficult and the temptation to fall back into old behaviours and attitudes will be there.
I said before that change is rarely easy. But I firmly believe that it is necessary for each of us to lead change within each of our organisation and promote the Defence Values for Acquisition to our people. I greatly appreciate your support in making this happen.
Last Updated: 19 Oct 05