Source · Select Committees · Public Accounts Committee
Recommendation 2
2
Accepted
Address existing data gaps in MoD's legacy inventory management systems within six months
Conclusion
The MoD’s inventory management systems remain outdated, and the quality of its data limits its ability to understand its inventory. MoD’s inventory management has faced long-standing issues with its many legacy IT systems, which have limited functionality and reinforce the fragmentation of its inventory management. While it has reduced the number of Support systems from around 250 in 2010 to 89 today, the two base inventory management systems used by the Army and Royal Navy respectively are nearly 40 years old. The MoD acknowledges that, while its visibility of its inventory is generally good, its system functionality can prevent staff from having a deeper understanding of it. For example, the Royal Navy’s base inventory system can record that an item is unserviceable, but not for what reason, meaning the MoD will not know what degree of repair it may need. In 2010, the MoD entered into a £800 million contract with Boeing Defence UK called Future Logistics Information Services (FLIS) that was due to run until 2022.1 However, in late 2020 the MoD signed a five-year contract extension worth £515 million called “Bridging the Gap”,2 which the MoD explained at the time would “provide capability that Bridges the Gap between the FLIS contract and the future long-term strategic solution, known as the Business Modernisation for Support (BMfS) project”.3 The MoD’s short-term plan for Bridging the Gap is to move the Army and Royal Navy onto an upgraded version of the Royal Air Force’s more modern inventory system. We do not see, however, how this step alone will address the existing gaps in its 1 WMS 3 December 2010 cc95WS-96WS 2 Q27 3 Tenders Electronic Daily, Ministry of Defence, ISTAR, SCIS, 11 December 2020 6 Improving Defence Inventory Management data. We are also concerned to hear that the MoD awarded the contract for this £515 million programme to a large defence prime contractor without a competitive tendering process. Recommendation: Within six months, the MoD should
Government Response Summary
The government agrees and commits to informing the Committee by letter within six months about the lessons learned from its review of the LCST contract and how they will be implemented. It also describes ongoing initiatives like the Munitions Strategy and Supply Chain Capability Programme to enhance inventory management.
Government Response
Accepted
HM Government
Accepted
The government agrees with the Committee’s recommendation. covering the topics listed above, within six months of the date of the Committee’s report. In following up queries raised during the hearing, the Permanent Secretary has written to the Committee to notify it of error in the department’s reporting of inventory stockpile holdings on its systems, which has been reflected in the NAO report that underpinned the Committee’s work on this issue. The correct data, shown in the table below, demonstrates markedly more success in managing down its inventory holdings than have claimed. Financial Year Type of Items Number of Items 2022-23 517k 457m 2021-22 523k 507m 2020-21 528k 550m 2019-20 557k 559m 2018-19 598k 559m 2017-18 640k 740m billion of investment in supply chains. Within six months, the MoD should inform the Committee by letter of the lessons learned from its review of the LCST contract and how it will take implement these. 4.1 The government agrees with the Committee’s recommendation. 4.2 The department’s implementation of the Defence Command Paper (Refresh) will lead to a closer collaboration with Industry. Specific activity will be delivered through several routes including the Munitions Strategy, Supply Chain Capability Programme and improved digital processes through BMfS which will enhance inventory management. The Supply Chain Capability Programme will develop a defence capability to jointly design Supply Chains with industry early in the Capability Development process. 4.3 With regards to the latter action, there have been several reviews of the LCST contract, and a formal contract reset between all parties in 2022 implemented several lessons learned to generate mutual benefit for the department and contracted delivery partner. Over this past year a formal assessment of the lessons learned from the LCST contract has been shared with the Future Defence Support Services programme which is scheduled to replace LCST in 2028. These lessons will be forwarded to the Committee together with confirmation on plans to implement.