Sunday, 15 November 2009

MOD Procurement - Only The Pensions Are Bullet-Proof

On 25 August 2007, an American Patriot missile shot down a British Tornado aircraft over Iraq, killing the pilot and navigator, Flight Lieutenant David Rhys Williams and Flight Lieutenant Kevin Main. During the same conflict, American aircraft attacked a friendly Kurdish and US Special Forces convoy. BBC translator Kamaran Muhamed was killed, while BBC reporter Tom Giles and World Affairs Editor John Simpson were injured. The Battlefield Target Identification System equipment programme, which could have prevented these tragedies, had previously been axed by the British Ministry of Defence. Subsequently it was half-heartedly reinstated. Today it is dormant.

And that sums up the decision-makers' distribution of billions of pounds each year, to protect our service people and the country they defend. For four decades, from conception to delivery the MOD's equipment procurement policies have been riddled with catastrophic failure.

This disaster has occurred not least from the financial point of view. Until the mid 1960s, the MOD contracted for its major systems such as aircraft, guns and tanks on a cost-plus basis, where the chosen supplier from industry took as its profit a percentage of the costs incurred in supplying the items required - so the more you spent, the more you made. The relationships between the Ministry and industry were often what would today be described as 'cosy', with major firms coming to the high table by turn. Not surprisingly in the circumstances, project cost over-runs were frequent. All that said, equipment was designed, built, and went into service.

But unable to control industry properly through its own rules of contracting, the Ministry turned to the process of competitive procurement. Companies would have to fight amongst themselves to win orders. This in turn often forced would-be suppliers to ignore their own cost estimates, and submit artificially low prices for their proposals to secure the work. Increased value for money from the Ministry's point of view? Often, no. Frequently, the projects stalled during implementation because the supplier was simply unable to take the pain of his real costs. The result? Either a rebid for the same equipment - causing untold programme delays - or an upward renegotiation of the price. For forty years, the MOD has shuffled between these two pricing method extremes, unable to find a middle ground allowing industry a reasonable profit while ensuring suitable financial controls are in place.

Neither does the Ministry enjoy sparkling relations with its own side of the fence. Often it clashes with the Treasury mandarins, not least at the end of each financial year when the Treasury seeks to recover unspent MOD budgets in order to reallocate them - as Government rules allow. In an annual ritual the Ministry argues against this though often, funds have lingered in MOD's coffers because of its fumbling in placing orders. Meanwhile, the armed forces, who the Ministry's staff think of merely as 'the user community', wait years for equipment. In meetings or project reviews with industry in which MOD civil servants and the military are both represented, ostensibly aligned as 'the buyer', time and again the atmosphere between them is toe-curling.

MOD's procurement organisation has a history of chronic staffing difficulties. During the mid-1980s, many of its offices were moved from central London to a single huge site at Bristol. The more able workers who didn't want to transfer to the south-west found new jobs in the capital, and overall staff calibre slumped. It has never recovered. These days, a rag-tag army of clerks and administrators makes up much of the MOD's buying force. Compared with industry, time-keeping and attendance are poor.

In attempts to improve staff efficiency, from time to time the Ministry has inflicted on itself various rigid route-map processes, which have stifled any slight tendency to innovation but provided peace of mind for the inexperienced and the timid. Instead of improving performance, predictably the result has been increased bureaucracy and further delays in ordering. Today, much of the Ministry's buying processes are gridlocked.

Not surprisingly, the MOD is at an all-time low in planning its future equipment needs. Decision-making is in hock to committees formed to promote collective rather than individual responsibility, which sits neatly alongside the comforting, popular concept of the no-blame culture. Repeatedly, projects are started, then cancelled and restarted as priorities are changed, and changed again.

Recently a huge order for two new aircraft carriers was awarded, but already the Ministry has allowed the delivery dates to drift into unknown waters. In Afghanistan, the Army has had to lease French unmanned spy planes by the hour, because the programme for the British equivalent is running years late. A contract for armoured vehicles has been put out to competition three times, but orders have still not been placed - and there is no sign of a decision on the winning contractor being made in the near future. A bid for a big programme can cost a company well over £100,000, with no guarantee of a return, but the Ministry is solipsistic and dismissive of industry's plight in repeatedly being asked to find such huge sums because of its dithering.

It isn't just the major systems and platforms that are affected. Vital personal equipment isn't reaching war zones quickly enough, directly resulting in loss of lives. Today, many front-line British troops are without adequate body armour or, incredibly, have to buy their own. This may have been the custom in Napoleonic times; today's soldiers are entitled to support consistent with their professional status, and the work they do. But in terms of bullet-proof protection, the priorities of MOD's civil servants are abrogation of responsibility, a safe, cushy office and a uniquely shielded pension.

And now, in a disgusting new twist, it emerges the Government is awarding bonuses totalling £47 million to those same civil servants, explaining that these are being paid on the basis of 'outstanding performance'. The figure coyly emerged in the form of a written reply to a parliamentary question from the Conservatives. Families of dead soldiers have lambasted the awards. Truly, when I learned of these payments I experienced deep revulsion.

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