Recommendations & Conclusions
17 items
4
Conclusion
Nineteenth Report - MoD Equipment Plan …
Accepted
Uncertainty about the MoD’s future demand for equipment hinders its work with industry to develop a resilient, responsive, and cost-effective supply chain. Key lessons from the war in Ukraine include the need for the Armed Forces to invest in weapon stockpiles and ensure resilience and agility in sustaining military capabilities. …
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Uncertainty about the MoD’s future demand for equipment hinders its work with industry to develop a resilient, responsive, and cost-effective supply chain. Key lessons from the war in Ukraine include the need for the Armed Forces to invest in weapon stockpiles and ensure resilience and agility in sustaining military capabilities. The MoD has earmarked £5 billion during the decade to 2032–33 to do this, half of which is additional funding provided by the HM Treasury across 2023–24 and 2024–25. The MoD recognises that building capacity, including the industrial skills base, will take time, and that in order to invest industry must have the confidence that the level of demand will continue. The MoD has launched some initiatives to provide assurance regarding future demand, including an order with BAE Systems for 155mm artillery shells. It is also engaging with industry to discuss technical developments which are occurring at fast pace because of the war in Ukraine. However, the failure to provide budgets that match ambition, such as the £5.9 billion funding shortfall in the shipbuilding pipeline, risks undermining suppliers’ confidence to invest in their capacity. Recommendation 4: In order to build industry’s confidence to invest in supply chain capacity, the MoD should develop and communicate clear and funded schedules of work for the procurement and support of its military equipment. MoD Equipment Plan 2023–2033 7
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Government response AI summary
The government agreed, stating it is already addressing the recommendation through the Integrated Procurement Model, Defence and Security Industrial Strategy, and other initiatives, including continuing to publish the Acquisition Pipeline twice yearly.
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HM Treasury
5
Conclusion
Nineteenth Report - MoD Equipment Plan …
Accepted
The MoD’s strategy for replacing ageing capabilities is undermined by the slow delivery of new systems, resulting in military capability gaps. Despite the MoD working with prime contractors to better understand its supply chain, increased international demand for key components and skilled workers has contributed to the slow delivery of …
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The MoD’s strategy for replacing ageing capabilities is undermined by the slow delivery of new systems, resulting in military capability gaps. Despite the MoD working with prime contractors to better understand its supply chain, increased international demand for key components and skilled workers has contributed to the slow delivery of defence equipment, including digital communications, armoured vehicles, and Royal Navy ships. For example, technical issues developing the state-of- the-art Type 26 frigate have contributed to delays, and the delivery of new warships for the Royal Navy is considerably slower than in other countries such as Japan. It has also been difficult for the defence industry to attract suitable candidates because the skilled people it requires, such as engineers, are in high demand globally. As a result, only two of the 46 MoD equipment programmes that are included in the Government Major Projects Portfolio (GMPP) are rated as being highly likely to be delivered to time, budget, and quality. Successful delivery appears to be unachievable for five GMPP programmes, including replacement communications technology, nuclear submarine reactors, and missiles. The MoD said that an emphasis on pace would be a key aspect of the new procurement strategy, which was subsequently announced in the House on 28 February 2024 as the new “Integrated Procurement Model” (IPM). In the meantime, the intensive use of existing equipment is creating a maintenance backlog that will take more time and money to address, leaving the UK’s Armed Forces having to make do with fewer pieces of ageing equipment. Recommendation 5: The MoD should include in next year’s Plan an assessment of what impact its new procurement strategy has had on improving the delivery of new capabilities and set out how this will provide continued improvement going forward.
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Government response AI summary
The government agreed, outlining that the new Integrated Procurement Model's implementation begins in April 2024 and will continue through 2024-2025, with monitoring of delivery pace and appropriate updates.
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HM Treasury
6
Conclusion
Nineteenth Report - MoD Equipment Plan …
Accepted
The MoD is becoming increasingly reliant on the UK’s allies to protect the UK’s national interests, which carries the risk that such support might not always be available. Recent international developments, including the war in Ukraine, have reinforced the importance of strategic international partnerships for the UK. The UK has …
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The MoD is becoming increasingly reliant on the UK’s allies to protect the UK’s national interests, which carries the risk that such support might not always be available. Recent international developments, including the war in Ukraine, have reinforced the importance of strategic international partnerships for the UK. The UK has been working with its allies, including Ukraine, to develop interoperable equipment, pool essential munitions and encourage industry to build its capacity to supply the necessary equipment. However, for deterrence to be effective the UK’s Armed Forces must be credible. Such credibility is undermined by widely reported recruitment and retention issues, with more people leaving the Armed Forces than are being recruited, the mothballing of Royal Navy ships because of crew shortages, and the unavailability this year of the only Royal Navy ship able to fully replenish the UK’s aircraft carriers because of a refit. Given the changing global security picture, it is vital for the MoD to work with industry, including through the Defence Suppliers Forum, and also the higher education sector to ensure sufficient supply of highly skilled workers and also apprentices to the defence sector. With the support of its allies, the UK’s Armed Forces continue to fulfil a crucial role internationally. However, many allies are facing similar challenges to the UK, which might affect their ability and willingness to continue providing extensive support. Recommendation 6: The MoD should assess the extent to which its capability requirements are reliant on support from the UK’s allies and develop mitigations for how it would manage the risk of allied support being curtailed or withdrawn. 8 MoD Equipment Plan 2023–2033 1 The affordability of the Equipment Plan
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Government response AI summary
The government agreed, stating that allied support is already understood, reviewed as part of capability planning, and rigorously scrutinized during force testing, with identified risks regularly captured and reviewed for mitigation.
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HM Treasury
9
Conclusion
Nineteenth Report - MoD Equipment Plan …
Accepted
The MoD’s aim is that the Plan provides a reliable assessment of the affordability of its equipment programme and demonstrates to Parliament how it will manage its funding to deliver equipment projects.26 The MoD’s headquarters provides the Front Line Commands and other budget holders with guidance on preparing their cost …
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The MoD’s aim is that the Plan provides a reliable assessment of the affordability of its equipment programme and demonstrates to Parliament how it will manage its funding to deliver equipment projects.26 The MoD’s headquarters provides the Front Line Commands and other budget holders with guidance on preparing their cost forecasts. However, it allows the budget holders to take different approaches to whether they include in their forecast costs all the capabilities they need to meet government’s expectations, or just those capabilities that they can afford.27 For example, the Royal Navy has included in the Plan predicted costs for all the capabilities the MoD expects it to deliver, and it has reported a 10-year budget deficit of £15.3 billion. In contrast, the Army has reported a deficit of £1.2 billion because it only includes those projects it can afford: its deficit would increase by around £12 billion if it included all the capabilities it needs.28
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Government response AI summary
The government agrees and will standardize the data production and presentation for the Equipment Plan from the Annual Budgeting Cycle planning round process to improve transparency and comparability, with a target implementation date of Spring 2025.
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HM Treasury
10
Recommendation
Nineteenth Report - MoD Equipment Plan …
Accepted
This flexibility means that users of the Plan, including Parliament, cannot compare Commands and other budget holders on a like-for-like basis.29 The MoD assured us that its ability to understand the Armed Forces’ capability and operational risks was unaffected by budget holders using different approaches to costing.30 However, as the …
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This flexibility means that users of the Plan, including Parliament, cannot compare Commands and other budget holders on a like-for-like basis.29 The MoD assured us that its ability to understand the Armed Forces’ capability and operational risks was unaffected by budget holders using different approaches to costing.30 However, as the Minister of State for Defence said in the House of Lords on 7 December 2023: “I have looked at budgets for the last 40 years and I have never seen a budget that resembles anything like this one, and that is not just the absolute figures. The way in which it is constructed means that it is very difficult to get to exactly the way in which the money moves around”.31 We are similarly puzzled about how the Plan can be allowed to contain such inconsistent approaches.32 The MoD conceded that this was not the most transparent part of its planning process, and that a Plan compiled on a consistent basis would clearly be easier to interpret.33 The MoD confirmed that it was happy to accept the NAO’s recommendation that the Plan should be prepared on a more consistent basis, and also conceded that the current approach made it difficult for us to hold the MoD to account.34 Funding the Defence Nuclear Enterprise
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Government response AI summary
The government agrees with the recommendation and commits to standardizing the data produced and presented for the Equipment Plan from the Annual Budgeting Cycle planning round process, with a target implementation date of Spring 2025.
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HM Treasury
14
Conclusion
Nineteenth Report - MoD Equipment Plan …
Accepted
The Ministry of Defence (the MoD) is working with industry to develop a resilient, responsive, and cost-effective supply chain. For example, it told us that it has been working with the Defence Suppliers Forum, which covers about 80 companies directly and the whole supply chain through trade associations, to ensure …
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The Ministry of Defence (the MoD) is working with industry to develop a resilient, responsive, and cost-effective supply chain. For example, it told us that it has been working with the Defence Suppliers Forum, which covers about 80 companies directly and the whole supply chain through trade associations, to ensure that its suppliers are monitoring supply chain fragility. It has also worked with its prime contractors to get visibility of at least four levels down in its supply chain.42
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Government response AI summary
The government agrees with the implied recommendation to strengthen supply chain resilience and transparency, committing to provide a clearer signal to industry on future demand through the new Integrated Procurement Model and continued publication of the Acquisition Pipeline, with a target implementation date of Spring …
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HM Treasury
15
Recommendation
Nineteenth Report - MoD Equipment Plan …
Accepted
Key lessons from the war in Ukraine include the need for the Armed Forces to invest in weapon stockpiles and ensure resilience and agility in sustaining military capabilities.43 The MoD has earmarked £5 billion over the decade to 2032–33 to develop this, half of which is additional funding provided by …
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Key lessons from the war in Ukraine include the need for the Armed Forces to invest in weapon stockpiles and ensure resilience and agility in sustaining military capabilities.43 The MoD has earmarked £5 billion over the decade to 2032–33 to develop this, half of which is additional funding provided by HM Treasury in 2023–24 and 2024–25.44 The MoD has started using the new money from HM Treasury on both enhancing production capacity and working down through the supply chain to secure the supply of essential commodities, such as chemicals.45
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Government response AI summary
The government accepted the recommendation, agreeing to provide clearer signals to industry on future demand through the new Integrated Procurement Model and existing tools like the Acquisition Pipeline, with a target implementation date of Spring 2025. It also committed to forming a new alliance with …
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HM Treasury
16
Conclusion
Nineteenth Report - MoD Equipment Plan …
Accepted
The MoD recognises that building capacity, including the industrial skills base, will take time, and that for industry to invest in this it must have confidence that the MoD’s demand will continue.46 For example, the MoD estimates that over the next 10 years industry probably needs an extra 10,000 or …
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The MoD recognises that building capacity, including the industrial skills base, will take time, and that for industry to invest in this it must have confidence that the MoD’s demand will continue.46 For example, the MoD estimates that over the next 10 years industry probably needs an extra 10,000 or so apprentices, graduate engineers and other staff to deliver the MoD’s defence nuclear programme.47 The MoD is working with industry through the Defence Suppliers Forum to try to get more apprenticeships created, and with the higher education sector to attract more people with science, technology, engineering and mathematical qualifications into the defence industry.48 The MoD is also seeking to encourage industry to train enough skilled tradespeople, such as master welders, who then go on to teach the apprentices.49 However, the MoD said that the defence industry has struggled to attract suitable candidates because the skilled people it requires, such as engineers, are in high demand globally.50
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Government response AI summary
The government agrees with the implied recommendation to build industrial capacity and skills, committing to provide a clearer signal to industry on future demand through the new Integrated Procurement Model and improved visibility of the acquisition pipeline by Spring 2025.
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HM Treasury
17
Conclusion
Nineteenth Report - MoD Equipment Plan …
Accepted
Because of high and volatile inflation, the MoD has changed its approach to contracting with suppliers. Formerly, around 25% of contracts were ‘firm price’, whereby the supplier bore the inflation risk.51 However, the MoD said that the cost of such firm price contracts has now become too great, and that …
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Because of high and volatile inflation, the MoD has changed its approach to contracting with suppliers. Formerly, around 25% of contracts were ‘firm price’, whereby the supplier bore the inflation risk.51 However, the MoD said that the cost of such firm price contracts has now become too great, and that it was not getting good value for money offers when 42 Q 112 43 Q 31; C&AG’s Report, para 2.20 44 Qq 130, 132; C&AG’s Report, para 2.20 45 Q 113 46 Qq 118, 119 47 Q 83 48 Q 108 49 Qq 128, 129 50 Q 108 51 Q 21; C&AG’s Report, para 2.4 MoD Equipment Plan 2023–2033 13 trying to get suppliers to bear the cost of inflation through new contracts.52 Instead, the MoD has decided to take on more inflation risk itself by linking cost increases in contracts to appropriate indices.53
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Government response AI summary
The government agrees with the implied recommendation to foster good industry relations, committing to improve visibility of long-term planning and form a new alliance with industry through the Integrated Procurement Model by Spring 2025, thereby supporting industry's ability to plan and invest.
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HM Treasury
18
Conclusion
Nineteenth Report - MoD Equipment Plan …
Accepted
The MoD has also launched some initiatives to demonstrate a long-term commitment to industry regarding future demand, including an order with BAE Systems for 155mm artillery shells.54 The MoD told us that it wanted to develop an “always-on production line on munitions”, so that it could surge supply when necessary.55 …
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The MoD has also launched some initiatives to demonstrate a long-term commitment to industry regarding future demand, including an order with BAE Systems for 155mm artillery shells.54 The MoD told us that it wanted to develop an “always-on production line on munitions”, so that it could surge supply when necessary.55 It is also engaging with industry to discuss technical developments which are occurring at fast pace because of the war in Ukraine. The MoD said that without government giving industry appropriate guidance, industry cannot make long-term commitments because the chances of it developing something that would not be marketable is high. The volatility in the nature of the threat means that what is most important is to build adaptable capabilities that can respond to changing requirements.56
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Government response AI summary
The government agrees with the implied recommendation to demonstrate long-term commitment and guidance to industry, committing to provide a clearer signal on future demand and improve visibility of long-term planning through the new Integrated Procurement Model by Spring 2025.
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HM Treasury
19
Recommendation
Nineteenth Report - MoD Equipment Plan …
Accepted
The MoD said that it tries to publish as much of its defence pipeline as it can to build supplier confidence.57 However, its failure to provide budgets that match ambition, such as the £5.9 billion funding shortfall in the shipbuilding pipeline, risks undermining suppliers’ confidence to invest in their capacity.58 …
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The MoD said that it tries to publish as much of its defence pipeline as it can to build supplier confidence.57 However, its failure to provide budgets that match ambition, such as the £5.9 billion funding shortfall in the shipbuilding pipeline, risks undermining suppliers’ confidence to invest in their capacity.58 Furthermore, the MoD’s focus on not committing to contracts for new projects—only about 25% of its 10-year budget is committed—might undermine its attempts to build supplier confidence.59 Delivering equipment programmes
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Government response AI summary
The government agrees with the recommendation to build supplier confidence, committing to provide a clearer signal to industry on future demand and improve visibility of long-term planning through the new Integrated Procurement Model by Spring 2025, continuing to publish the Acquisition Pipeline twice yearly.
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HM Treasury
20
Conclusion
Nineteenth Report - MoD Equipment Plan …
Accepted
Only two of the 46 MoD equipment projects that are included in the Government Major Projects Portfolio (GMPP) are rated as being highly likely to be delivered to time, budget and quality (green).60 Successful delivery appears to be unachievable for five GMPP projects (red), including replacement communications technology, nuclear submarine …
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Only two of the 46 MoD equipment projects that are included in the Government Major Projects Portfolio (GMPP) are rated as being highly likely to be delivered to time, budget and quality (green).60 Successful delivery appears to be unachievable for five GMPP projects (red), including replacement communications technology, nuclear submarine reactors, and missiles.61 The rest of the GMPP projects are rated amber, which means that delivery appears feasible, but there exist significant issues requiring management attention.62 The MoD told us that it has introduced several initiatives to address this, including regular GMPP review meetings, started by the Minister for Defence Procurement, which focus on red- and amber-rated projects, and project review meetings led by non-executive directors on the board of Defence Equipment & Support.63
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Government response AI summary
The government agrees and will implement the Integrated Procurement Model from April 2024, aiming to drive increased pace in delivery of military capability through new services, guidance, and independent advice, with full implementation continuing through 2024-2025.
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HM Treasury
21
Conclusion
Nineteenth Report - MoD Equipment Plan …
Accepted
The MoD has made some progress with training senior responsible owners (SROs) and increasing the proportion of their time spent on delivering projects.64 SROs also now 52 Q 23 53 Qq 21, 23; C&AG’s Report, para 2.4 54 Qq 31, 113; C&AG’s Report, para 2.6 55 Q 30 56 Q …
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The MoD has made some progress with training senior responsible owners (SROs) and increasing the proportion of their time spent on delivering projects.64 SROs also now 52 Q 23 53 Qq 21, 23; C&AG’s Report, para 2.4 54 Qq 31, 113; C&AG’s Report, para 2.6 55 Q 30 56 Q 75 57 Q 75 58 Q 26; C&AG’s Report, para 2.6 59 Qq 15, 16 60 Q 102; C&AG’s Report, para 2.11 61 Q 106; C&AG’s Report, paragraph 2.11; “The full definition of ‘red’ is that “Successful delivery of the project appears to be unachievable. There are major issues with project definition, schedule, budget, quality and/or benefits delivery, which at this stage do not appear to be manageable or resolvable. The project may need re- scoping and/or its overall viability reassessed.” 62 C&AG’s Report, para 2.11 63 Q 111 64 Q 122 ; C&AG’s Report, para 2.12 14 MoD Equipment Plan 2023–2033 have a direct route to contact senior MoD staff if they are concerned about progress.65 However, the MoD has faced difficulties both in funding teams to support SROs, and in recruiting and retaining suitably qualified and experienced staff.66 The MoD said that it is facing a slow and steady attrition of skilled staff, because they have attractive skillsets that are wanted by many industries in a vibrant job market.67 In March 2023, recruitment and retention problems resulted in SROs for 24 out of 30 major MoD equipment projects rating the availability of skills and capabilities for their projects as amber, while four rated it red.68
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Government response AI summary
The government agrees and will implement the Integrated Procurement Model from April 2024, aiming to drive increased pace in delivery of military capability through new services, guidance, and independent advice, with full implementation continuing through 2024-2025.
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HM Treasury
22
Recommendation
Nineteenth Report - MoD Equipment Plan …
Accepted
Since the end of COVID-19 restrictions, there has been increased international demand for key components and skilled workers from other sectors, such as the car and commercial aviation industries.69 This has contributed to the slow delivery of defence equipment, including digital communications, armoured vehicles and Royal Navy ships.70 For example, …
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Since the end of COVID-19 restrictions, there has been increased international demand for key components and skilled workers from other sectors, such as the car and commercial aviation industries.69 This has contributed to the slow delivery of defence equipment, including digital communications, armoured vehicles and Royal Navy ships.70 For example, solving technical issues affecting the state-of-the-art Type 26 frigate has contributed to delays, while demand for semiconductors by other industries has affected the progress of the Army’s Boxer armoured fighting vehicle project.71 The delivery of new warships for the Royal Navy is currently considerably slower than in some countries such as Japan, although the MoD is hopeful that the pace will quicken as projects, such as Type 31 frigates, become more established.72
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Government response AI summary
The government accepted the recommendation, stating it has introduced a new Integrated Procurement Model, announced in February 2024, to increase the pace of military capability delivery, with implementation beginning in April 2024 and continuing through 2025.
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HM Treasury
23
Conclusion
Nineteenth Report - MoD Equipment Plan …
Accepted
An emphasis on pace is one of five key features of the new “Integrated Procurement Model” which the Minister for Defence Procurement announced on 28 February.73 For example, the MoD plans to get new capabilities into the hands of the Armed Forces more quickly by introducing them into service when …
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An emphasis on pace is one of five key features of the new “Integrated Procurement Model” which the Minister for Defence Procurement announced on 28 February.73 For example, the MoD plans to get new capabilities into the hands of the Armed Forces more quickly by introducing them into service when the “minimum deployable capability”— 60% or 80% of the capability—has been developed, then adding the remaining capability when in service (this technique is sometimes referred to as ‘spiral development’). In our session, the MoD cited its modular approach to the Boxer armoured vehicle project to illustrate this method.74 The new procurement model also includes a joined-up approach based on “pan-defence affordability”; a new Integration Design Authority; prioritising exportability to maximise the potential market for UK-developed defence capabilities; and closer engagement with industry to encourage innovation and make supply chains more resilient.
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Government response AI summary
The government agrees and confirms the implementation of the Integrated Procurement Model from April 2024, designed to drive increased pace in military capability delivery through new services, guidance, and independent advice, with full implementation continuing through 2024-2025.
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HM Treasury
24
Conclusion
Nineteenth Report - MoD Equipment Plan …
Accepted
In the meantime, the intensive use of existing equipment is contributing to a maintenance backlog that will take more time and money to address, leaving the UK’s Armed Forces having to make do with fewer pieces of ageing equipment nearing the end of their in-service lives.75 For example, there is …
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In the meantime, the intensive use of existing equipment is contributing to a maintenance backlog that will take more time and money to address, leaving the UK’s Armed Forces having to make do with fewer pieces of ageing equipment nearing the end of their in-service lives.75 For example, there is uncertainty about whether two Type 23 frigates that have recently gone into refit will return to active service.76 If they do not, this 65 Q 111 66 C&AG’s Report, para 2.12, 2.13 67 Q 127 68 C&AG’s Report, para 2.13 69 Q 108 70 Q 112; C&AG’s Report, para 2.5 71 Qq 108, 112 72 Q 42 73 Defence Procurement Minister oral statement on the Integrated Procurement Model – 28 February 2024 – GOV. UK (www.gov.uk) 74 Qq 33, 34, 84 75 Qq 46, 114 76 Q 35 MoD Equipment Plan 2023–2033 15 would further curtail the Royal Navy’s already limited capacity to provide escorts.77 The Type 23 class is coming to the end of its in-service life, and the cost of refitting them has increased from £23 million to £100 million because their age means that the necessary work is now much more extensive and takes almost twice as long to complete.78 Reliance on allies
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Government response AI summary
The government agrees with the committee's implied concern regarding equipment readiness and responds by implementing a new Integrated Procurement Model from April 2024, designed to accelerate the delivery of military capability.
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HM Treasury
27
Conclusion
Nineteenth Report - MoD Equipment Plan …
Accepted
In the meantime, the MoD is considering mothballing Royal Navy ships because of crew shortages, and the only Royal Navy ship able to fully replenish the UK’s aircraft carriers is unavailable this year because of a refit.86 With the support of its allies, the UK’s Armed Forces continue to fulfil …
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In the meantime, the MoD is considering mothballing Royal Navy ships because of crew shortages, and the only Royal Navy ship able to fully replenish the UK’s aircraft carriers is unavailable this year because of a refit.86 With the support of its allies, the UK’s Armed Forces continue to fulfil a crucial international role.87 However, many of its allies are facing similar challenges to the UK, which might affect their ability and willingness to continue providing extensive support.88 77 Qq 39, 40 78 Q 41; C&AG’s Report, para 2.5 79 Q 41 80 Qq 76, 116, 118, 120 81 Q 61 82 Qq 8, 11, 49 83 Qq 8, 54 84 Qq 10, 11 85 Qq 6, 125 86 Qq 41, 43, 48–50 87 Q 54 88 Qq 108, 117 16 MoD Equipment Plan 2023–2033
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Government response AI summary
The government agrees with the implied recommendation to address capability challenges, committing to ensuring balanced capabilities, driving cooperative burden-sharing with allies, and rigorously reviewing allied support and identified risks as part of ongoing capability planning and force testing, with a target implementation date of Spring …
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HM Treasury