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Defence Acquisition

I begin by saying how much I agree with the noble Lord, Lord Astor, when he states that our Armed Forces surely deserve the best equipment and that the taxpayer deserves the best value for money. They absolutely do. In response to the point from the noble Lord, Lord Lee, about the scale of the problem that we face, I accept that this report shows that in stark relief. Taking into account the fact that the report was based upon a sample of projects—so that it did not review all defence procurement projects— the conclusions coming from that review are, none the less, pretty stark. We really do need to improve the performance in the Ministry of Defence. However, the noble Lord asked me a direct question about whether or not Ministers were aware. It is quite clear that Ministers have certainly been aware—including me, as a former defence procurement Minister—of the long-standing challenge of managing defence procurement effectively, as have many of my predecessors. However, the size of the problem that Mr Gray has identified takes us further in two respects. First, it shows the scale of the problem, which is extremely significant. Secondly, it goes to the heart of the causes of the problem in a way that previous reviews, going back many decades, have not. That comes from two areas. He first asks questions about the framework within which defence procurement projects have to be decided, and then he asks questions, given that framework, about the performance of the defence organisation in implementing the management of those projects. On the framework, the fact that Mr Gray has identified the need for much more regular Strategic Defence Reviews every time there is a new Parliament, and for the defence equipment plan to be planned within a 10-year planning framework agreed with the Treasury, provides an effective framework to enable the reality of defence procurement to take place in an effective manner. The control, which will now exist from the new executive committee, of having an affordable plan sign-off annually within that regular Strategic Defence Review gives the Ministry of Defence an opportunity to manage this well, in a way that it has not done before. I absolutely reinforce what I said last week. I was asked by noble Lords about implementation. Our target is to implement these reforms—which we accept despite their stark nature—within six months. We need to fix these problems. Bernard Gray has identified in his review how each service in the Armed Forces quite rightly acts to do the best for each service, but that the way in which that is managed between the three services does not provide the best result for defence as a whole. The clarification of the roles between the service and the providers needs better discipline within a structure, strengthened with better training of personnel in planning and project management. That goes to the heart of why, after reflecting for several weeks on the recommendation of a GOCO, we have decided that that would not be the right thing to do. We have learnt over the past few years that the reforms that we have implemented have been seen to be successful—in particular, I point to the success in delivering equipment to operations through the UOR process. Having the military absolutely integrated into the acquisition process, whereby military personnel who have recently returned from theatre are working with civilians and industry to deliver projects, is the way to deliver kit that is absolutely fit for purpose. Although, if one privatised the DE&S and separated it into a GOCO it may be possible to retain military expertise for a period of time, that military expertise would become outdated in pretty short order because it would not be possible to have military personnel from the armed services, from operations, working within that organisation. We have therefore concluded that we need to implement the reforms on improved skills, but to do so while retaining the defence procurement function centrally within the Ministry of Defence. The draft report was provided to Ministers in July. Since then, we have been working with Bernard Gray on the detail of his report and potential recommendations and, therefore, on a plan of implementation. We will be working with Mr Gray and with L.E.K. Consulting. Finally, the noble Lord asked how the Government intend to balance the books. The books may only be balanced through an SDR. We have committed to carrying out that SDR immediately after the general election. We will be setting out in our Green Paper early in the new year the themes that will lead into that SDR. That gives the Ministry of Defence the best possible chance to plan, in the run-up to the general election, the answer to that important question.