Armed Forces Act (Continuation) Order 2017

Lord Levene of Portsoken Excerpts

Tuesday 21st March 2017 Lords Chamber

[Lord Levene of Portsoken (CB)]

My Lords, it is a great pleasure to follow the noble Baroness, Lady Dean, whose wise words on defence are always worth paying attention to. I thank her for her chairmanship of the group to which she referred, from which we all benefit. I also pay compliments to the noble Lord, Lord Touhig, for the efforts that he always makes to promote the importance of defence in Wales. He does a great job on that. I declare my interests as chairman of General Dynamics UK.

At a time when there is so much uncertainty in international relations, both in Europe and the wider world, our thoughts must always turn towards our defence to ensure that the nation is well protected. During this debate, with so many distinguished contributors, we are learning much of how our Armed Forces and others are properly prepared. But for those Armed Forces to be prepared, that preparation can be most effective only when they are supplied with the best equipment embodying the latest technology. The task of procuring this equipment is undertaken by the Defence Equipment and Support division of the Ministry of Defence, which is staffed by serving officers and civilians. For years, that division and its results have been, all too often, the subject of uninformed criticism centred on perceived delays or excessive cost when, very often, a fuller examination of these issues reveals a different picture.

Defence procurement around the world always gives rise to such feelings and countries have different approaches to dealing with it. The noble Lord, Lord West, recently asked a Question in your Lordships’ House relating to defence industrial policy. I was at pains to say that I did not believe that we should revert to an approach of “national champions”, which we had some years ago and which failed. So I shall speak today about the way in which we go about procuring our equipment for the Armed Forces and the DE&S organisation which is responsible for that task. It is a task for which some 30 years ago I had responsibility and, having been asked more recently by successive Defence Secretaries to oversee a process known as defence reform, I think that my perception of this area is relatively up to date.

Defence procurement requires a thorough understanding of the interaction between technology, production and commercial realism. I have argued for a long time that this was not necessarily very different from imperatives in other industries and that that process should be led by an experienced businessman, who understood both the development and the commercial imperatives. In my opinion, and at long last, the Government have managed to recruit an outstanding individual to head the organisation in the person of Tony Douglas, the man who previously ran the Abu Dhabi airport authority. Your Lordships will understand that that was no mean feat. This is a man used to getting complex projects completed on time and on cost: precisely what is needed in the Ministry of Defence post which he now holds.

To give further credit to those making this appointment, it was decided a little earlier to appoint a non-executive chairman to oversee the division. An inspired choice was made in choosing Paul Skinner to do this, a man whose reputation precedes him from his time spent at Shell and Rio Tinto. The top of the organisation is now in place and we should be able to deliver what we need, on time and on cost.

So far, so good, your Lordships may think, but like any other efficient organisation, it requires a clear line of control. In my view, it requires the chief executive to have authority and control over all the parts of his organisation. I have therefore been greatly concerned to look at the way in which the acquisition of the nuclear submarine successor programme is being largely hived off to a separate procurement organisation, over which DE&S will only have much reduced influence. It may be that that decision was driven by the Treasury, whose understanding of procurement in the past, I have to say, has been far from perfect, but it has taken years to find the right person to run DE&S and now the Ministry of Defence seems to be looking for yet another person to run the submarine programme. I believe that is fundamentally wrong. I know what has driven it, but I do not agree with it.

I hope that it is not too late for the Minister to discuss this with his colleagues to see whether a more suitable arrangement can be arrived at. The nuclear submarine programme is a very complex one, involving the design, development and construction of the most modern vessels. I can say from my past experience that this interface is complex but needs, in every way, to be closely connected with the rest of our defence procurement programme. A separation is wrong, and I believe it will not deliver the outcome that we really need.

I hope your Lordships may concur that we have some extremely dedicated people working on both the military and the civilian side in procurement, who rarely attract praise but very frequently are blamed for faults that often do not really exist or have been misinterpreted. As I said, we need the very best equipment to be procured. We need the best people to enable us to achieve this, and those people deserve our absolute support.

Defence: Industrial Strategy

Lord Levene of Portsoken Excerpts

Monday 27th February 2017 Lords Chamber

[Earl Howe]

I agree with the central thrust of the noble Lord’s proposition. As I said, many of the industrial strategy themes, particularly around removing barriers for UK companies to do business with government are well aligned with our refreshment of defence industrial policy. It is all about updating our terms of trade with industry to continue to deliver the best equipment for the Armed Forces at the best value for money, but in a way that supports UK industry to grow and compete successfully. That is the balance we are trying to strike.

[Lord Levene of Portsoken (CB)]

My Lords, I declare my interest as chairman of General Dynamics UK. Many years ago now, I was given the task of unscrambling the defence industrial policy, which was centred on so-called national champions. This policy resulted in significant cost overruns and delay in delivery of equipment badly needed by our Armed Forces. Will the Minister please confirm that the Government have no intention of reverting to that policy and remain committed to the policy of competitive procurement which has served the nation well?

[Earl Howe]

My Lords, I can reassure the noble Lord in that regard. The Government remain committed to the principles we set out in our 2012 White Paper, National Security Through Technology, including promoting open competition. We will be refreshing our defence industrial policy very much within that framework.

Defence Reform Bill

Lord Levene of Portsoken Excerpts

Monday 3rd February 2014 Grand Committee

[Lord Palmer of Childs Hill]

My Lords, I will add a few points. At Second Reading, I said that I understood the weaknesses in Part 1 but wanted it to remain part of this legislation. I have not changed my mind on that. I thought the words of the noble Lord, Lord Robertson, about the scandal of defence procurement summed that up. Coming into this much more recently, it was clear to me with my experience of procurement that it was not fit for purpose. I am not blaming anyone for that: many people tried to change it, including some noble Lords in this Room, but were not able to.

The noble Lord, Lord Rosser, made the point about this being a stalking horse. In fact, the word used was “baseline”. The question raised by many noble Lords in previous debates was why two of the three bidders for the GOCO came out of the bidding. In my view, they must have realised that they could not work out the baseline—that is, the actual cost of running the department. Numerous sorts of contracts—even contracts with the same companies and contractors—are done under different agreements and bases. Therefore, two of the bidders left probably because they did not feel they could see where the profit was with any degree of certainty. Left with only one bidder, the Secretary of State was clearly right to say that one could not go forward with a GOCO at that stage. However, as my noble friend Lord Roper said, a great achievement was reached by some of us who spoke with my noble friend the Minister and the Secretary of State about having a sunrise clause—that is, Clause 24. That means that it has to come back to both Houses before you proceed with a GOCO. Whichever Government are in power when that happens, that will give them a big control.

The noble Lord, Lord Robertson, spoke very warmly about Mr Gray, the Chief of Defence Materiel. I have only come to this more recently and probably never saw all the good things that the gentleman did. We are in a new ball game now. DE&S+ will come into force only in April and will probably get going properly only by the autumn. Mr Gray’s contract ends on 31 December 2014. He might well apply for the new chief executive post thereafter—that is of course everybody’s right, and the employer has every right to decide who it should be. However, this is purely a run in, using Mr Gray’s experience in the coming months to help set up DE&S+, and it is obviously in the future as to who that person or persons will be.

A very good question was raised by the noble Lord, Lord Rosser, about the freedoms agreed with the Treasury. I hope my noble friend the Minister when he replies can give some assurances on what levels of payment the Treasury will allow to be made to senior employees of the MoD. Also, why does he believe that the super-affirmative Motion is not needed with Amendment 24—in other words, why should we go with Amendment 24 and not Amendment 25? I look forward to my noble friend’s reply.

[Lord Levene of Portsoken (CB)]

My Lords, I can claim to have spent quite a lot of time working on this particular issue, having held the post of Chief of Defence Procurement for six years. The noble Lord, Lord Robertson, was kind enough to pay tribute to some of the work I did but said that I did not stay around long enough to finish it off. I was actually there for six years. If anybody could look through the results of the Procurement Executive, as it was called at the time, they would see that at the end of those six years as compared with the beginning we had actually resolved most of the problems. I say that without fear of contradiction because if anyone consulted the report prepared by the National Audit Office at that point they would find that for the first time the outturn of the budget matched what we expected it to be and that contracts were being delivered on time.

Defence Reform Bill

Lord Levene of Portsoken Excerpts

Tuesday 10th December 2013 Lords Chamber

[Lord Levene of Portsoken (CB)]

My Lords, I welcome this opportunity to comment on the progress of defence reform in the Ministry of Defence. When the former Defence Secretary, Dr Liam Fox, took office, he asked me to chair a steering group to monitor the progress of that reform. Your Lordships may recall that at the time a very large shortfall had been revealed in the funding of the forward programme of the MoD, and so drastic action had to be taken. That group produced a report, which was published in June 2011, containing a large number of recommendations, several of which required substantial change in the working practices of both the department and the military. After the report was published and the present Defence Secretary, Philip Hammond, took office, he asked me to continue to monitor progress on those recommendations. The first such report was published in December 2012 and I undertook to produce a further update before the end of this year.

Your Lordships will be able to see from that second annual report, which was published last month, the detail of what had been concluded, which was that further significant progress had been made on putting into effect the earlier recommendations. These changes, which were welcomed within the department at all levels, both military and civilian, have become the norm for behaviour in the department and, in my opinion, are being carried out with real enthusiasm. I take this opportunity to congratulate those who have worked and who continue to work in this sphere on what they have achieved.

Today, the Defence Secretary has detailed his conclusions as to the way forward for the Defence Equipment and Support organisation, where an evaluation has been under way for some time as to whether that operation should become a GOCO, a government-owned contractor-operated organisation. This has generated considerable discussion. As someone who was responsible for managing defence procurement for six years, I have to say that I have never believed that a GOCO is the right solution.

I have no prejudice against GOCOs. At the time that I was working for Michael Heseltine, the then Defence Secretary—now, the noble Lord, Lord Heseltine—I introduced the first GOCOs into the Ministry of Defence to take on responsibility for the management of the Royal Navy dockyards at Rosyth and Devonport. These proved to be very successful and were then transformed from GOCOs into facilities managed totally within the private sector.

Defence procurement, however, is not an industrial operation. When procurement is undertaken on behalf of Her Majesty’s Government for the Armed Forces, there are many other factors which need careful attention. These factors include the need to bear in mind the likely effects on the wider economy, the need to consider the strategic implications of a procurement decision, and the need to take into account international implications. It is in the nature of a commercial bidder from the private sector that they will be just that, and therefore the need to demonstrate total impartiality is an extremely difficult task to manage.

I underline my concern at the way that some politicians continue to run down the abilities of civil servants throughout Whitehall. It has become far too common recently for both the military and civilian staff within the MoD who manage those procurement programmes to be depicted as poorly suited to run complex, large commercial contracts because they are insufficiently experienced in that domain. I can reference numerous instances where both civil servants and military officers have transferred into the private sector, where they are in great demand and prove to be a major asset. I should like to cite just one example for your Lordships.

After I left the Ministry of Defence, I was asked to take over as chairman of the Docklands Light Railway, the performance of which was woeful. I asked for permission to recruit two or three military officers and civil servants to sort out what had become an ever-growing shambles. They seized the problem and converted the railway into one of the most efficient operations in Europe. And whom did I select as the chief executive for this task? It was none other than a very modern major-general, who became the star of the show. Therefore, can we perhaps celebrate and exploit the talents of these remarkable people, and stop running them down?

Your Lordships may well ask why, if that is the case, there has been a problem in managing defence procurement successfully. In my view, the answer is straightforward. The one element of understanding which is in very short supply in the organisation is very top-level commercial experience. However, in order to acquire this, I do not believe it is necessary to create the type of revolution which the handing over of this function to a private sector business would undoubtedly create. I believe that once real commercial experience is made available to the department—and the number of people required to achieve that is no more than a handful—existing staff within the department will respond well and successfully to that leadership.

Those of your Lordships who may doubt that should look back to what has previously been achieved. I should like to refer to a report of the Public Accounts Committee on the Ministry of Defence major projects statement:

“The department has undertaken a review of a total of 37 projects, each valued in excess of £100 million started in the last five years ... the cost to date was just under one % less than the department estimated when the orders were first placed. And ... 28 of the 37 projects were expected to be completed on time, one was ahead of schedule and of the rest, only three had delays that were expected to exceed one year, the delays would not result in additional costs falling on the department”.

That report was dated October 1991.

For all those reasons, the Defence Secretary’s decision to drop the plan for a GOCO in favour of what has been termed DE&S-plus is undoubtedly the right one. I should be grateful if the Minister, when he responds to the debate, could explain the difference between DE&S as we have it today, DE&S-plus, its predecessor but two the Defence Procurement Agency, a GOCO and, if I may use the term, DE&S-plus-plus. That would help the House to understand this matter better. The essential thing, in my view, is to enable the Defence Secretary to employ the small number of people needed on competitive, commercial terms, thus removing the barrier that has stood in the way for so long.

The Statement speaks of the new organisation having a strong board and an independent chairman and chief executive, who, as I had strongly recommended, will be an accounting officer. Bearing in mind the Government’s total commitment to competition, where is the competition for the key post—that of the chief executive? We are told that the new chief executive has agreed to take up the post. Can we be sure that his track record qualifies him to be unquestionably the best head of this new organisation in the absence of any kind of competitive process? Somehow, that does not seem quite right to me.

I wish the Secretary of State and the department every success in their task. It will not be easy but it can be done and I believe that, once it has been done, our procurement function will once again be fit for purpose.