Source · Select Committees · Public Accounts Committee
Recommendation 18
18
Accepted
MoD's medical supply contract incentives improved project numbers but performance remains below required levels.
Conclusion
The MoD explained that the incentives for the LCST contract were intended to prioritise efficiency, but that medical supplies are a difficult area in which to achieve efficiencies. From 2019, the MoD changed the contract’s incentivisation by taking back a portion of the fee and returning it only if Team Leidos hit time targets and was able to deliver new projects and equipment faster. This did yield improvements; for example, the number of new medical equipment projects increased from six a year to around 36.40 However, performance for medical had still not improved to the required level, and in 2023, the MoD approved further improvement initiatives which will ultimately require it to pay the supplier a further £13.2 million.41 This includes bringing in 35 more people with medical experience into the Team Leidos and the introduction of a specific performance target for fast-moving commodity medical items, which the MoD stated Team Leidos was now reaching on a regular basis.42 Excess and unserviceable stock
Government Response Summary
The government agrees and details significant transformational changes already implemented within the LCST contract, including increased staffing and improved medical availability. They commit to further strategic engagement with DHSC for medical stockpiles and introducing smarter ways to maintain contingent medical stock, with a target implementation date of January 2025.
Government Response
Accepted
HM Government
Accepted
5.1 The government agrees with the Committee’s recommendation. Target implementation date: January 2025 5.2 There has been notable transformational change injected into the LCST contract over recent years including a £13.2 million uplift in staff employed inside the Delivery Partner (Team Leidos) together with additional staff established into key areas of UK Strategic Command. 5.3 The primary aim has been to segment medical activity from the broader scope of LCST and strengthen customer-supplier integration across the range of forecast, planning and operational activity. This additional investment has been coupled with analysis and planning that has led to improved requirement definition of medical equipment, alternate routes to market and key changes to the end-to-end supply chain policy & process. This has resulted in a sustained period of above contractual target (92%) Medical availability performance since September 2023. Process improvements are in place to ensure that short shelf-life medical materiel can meet the challenge presented by long duration maritime deployments. Similar process improvement, ensuring speed of procurement, has already been made to aero-medical equipment. Next steps include strategic engagement with the Department of Health and Social Care to elicit access to medical stockpiles and the introduction of smarter ways in which contingent medical operational stock might be maintained at readiness to support Defence activities. The Future Defence Support Services programme (which replaces LCST in 2028) is already well advanced in understanding the specific needs of Defence Medical, and particularly medical devices. Equipped with greater contractual leverage and alongside a Defence customer who has learned, it will substantially redress the challenges encountered by LCST. 5.4 The Permanent Secretary has written separately on this issue as part of follow up to queries raised in the Committee hearing.