Defence Procurement

Debate between Lord Hammond of Runnymede and Peter Luff

Tuesday 10th December 2013 Commons Chamber

[Mr Hammond]

I have the Hansard quote in front of me. The former shadow Secretary of State welcomed the competition and said that we needed to test the two propositions against each other, which is what we have done. The hon. Member for Barrow and Furness (John Woodcock) makes an assertion that I can tell him is wrong. I have always recognised that there are significant risks to the GoCo proposition and significant potential benefits from it. The challenge is to weigh the risks and the benefits and we would not be able to do that until we received the bids, which is why we had to run a competition.

We have seen the proposal that has been worked up by the DE&S plus team only in the last three weeks. It has worked behind a Chinese wall and has made clear that it believes that there will have to be an injection of external private sector skills in the form of an external business partner, in addition to the freedoms and flexibilities that it seeks within the organisation. That is the model that we are now going to put in place.

[Peter Luff (Mid Worcestershire) (Con)]

Although I accept that the Secretary of State had little choice but to make the announcement that he has made today to the House, I am sure that he will share my deep sense of regret that we cannot move more rapidly to the greater savings and performance improvements that a GoCo would have delivered. Can he reassure me a little about the private sector’s role in this new organisation? Can he unpack for me a little how the private sector will operate within the GoCo model and the DE&S plus model, and particularly reassure me that this is not just a recipe for more contractors?

[Mr Hammond]

I am grateful to my hon. Friend—someone who, again, knows something about this from his long service in the Department. The key distinction is between a model that puts the private sector in day-to-day leadership of the organisation—working on an incentivised fee that places it at risk—and a model where the private sector provides specific skill sets to civil service decision makers. That is the distinction. What we envisage in the DE&S plus model is probably three separate contracts; one to provide us with programme management support, a spine for the organisation; one to provide us with HR support, an area of particular weakness in DE&S; and a task-and-finish project to install some additional financial control systems within the organisation.

Aircraft Carriers and UK Shipbuilding

Debate between Lord Hammond of Runnymede and Peter Luff

Wednesday 6th November 2013 Commons Chamber

[Mr Hammond]

As a south-east MP, I understand well that not all of the south-east is affluent with high employment. There are areas that depend on specific industries which are as vulnerable as other areas anywhere in the country. I will endeavour to ensure that the points that my hon. Friend has raised are taken fully into account.

[Peter Luff (Mid Worcestershire) (Con)]

I commend the Secretary of State, the Minister for defence equipment—the Under-Secretary of State for Defence, my hon. Friend the Member for Ludlow (Mr Dunne)—the Chief of Defence Matériel and all those involved for making the best of a very difficult situation. Will my right hon. Friend clarify the purpose and capabilities of the three new very welcome offshore patrol vessels?

[Mr Hammond]

They will be more capable than the existing River class, as they will be able to take a larger helicopter and will be 10 metres longer. They will be able to undertake a full range of duties, including not only fishery protection but the interdiction of smuggling, counter-piracy operations and the protection of our overseas territories.

Defence Reform Bill

Debate between Lord Hammond of Runnymede and Peter Luff

Tuesday 16th July 2013 Commons Chamber

[Mr Hammond]

The Government have a focused initiative to increase participation of small and medium-sized enterprises in the defence supply chain. Such businesses provide a tremendously important part of our defence resilience. Because they are often buried in complex supply chains led by a large prime contractor, their contribution is not always noticed as much as it should be, but they are an important part of the equation. I will come later to the balance between open competitive procurement and single-source procurement, which is at the heart of part 2.

The Bill has three main parts. Parts 1 and 2 deal with defence procurement and part 3 deals with our reserve forces. Turning first to procurement, I think that few in this House would not agree that the way in which we develop, specify, procure and support defence equipment can and must be improved. We have already made significant progress, but we recognise that fundamental change is needed if we are to sustain that progress and to deliver the equipment that the armed forces need and the value for money that the public are entitled to expect. Now is the time to make those changes.

For decades, our defence equipment programme has suffered from poor time and cost forecasting and poor project and programme management, leading to delays, cost overruns and specification failures. We have to address these issues by challenging the pattern of incentives and behaviours once and for all. That is why, after success on military operations, my priority as Defence Secretary has been to establish, for the first time, a fully costed and deliverable 10-year equipment plan. This has now been achieved and published. Our armed forces now have the certainty that the equipment they are expecting has been both planned for and is properly funded. However, if we are to deliver this programme consistently and to entrench a better method of working to provide a better service to the front line in future, we need fundamentally to reform our defence acquisition processes and structures.

The previous Government were of course aware of this problem. Towards the end of their time in office, they commissioned the independent report by Bernard Gray into the acquisition process. That report found serious structural and cultural problems in the way in which we procure defence equipment. We have considered carefully its analysis and the options available for reform of Defence Equipment and Support. My predecessor appointed its author as Chief of Defence Matériel, with a remit to take the reform agenda forward. The results of that work are set out in the White Paper, “Better defence acquisition”, which I published on 10 June this year.

Our preference is to transform the existing Defence Equipment and Support organisation into a Government-owned, contractor-operated organisation—a GoCo. We believe that this model is the one most likely to embed and sustain the significant behavioural change required to transform defence acquisition. However, belief alone is not enough, and we will test this proposition through a commercial competition and against a public sector comparator. If, at the end of this rigorous evaluation process, a GoCo is assessed to be the best-value-for-money option, a private sector partner will be appointed to manage DE&S on behalf of the Secretary of State. This will be a radical change, but not quite as radical as some of the more lurid headlines have suggested.

[Peter Luff (Mid Worcestershire) (Con)]

I am most grateful to my right hon. Friend for his compelling speech and for giving way. May I ask him about the timetable for the process he has outlined? When will these things actually happen?

[Mr Hammond]

We expect to reach a decision point in the commercial process next spring. If we go down the route of appointing a GoCo, we expect the GoCo operator to be appointed late in 2014 or at the very beginning of 2015.

Better Defence Acquisition

Debate between Lord Hammond of Runnymede and Peter Luff

Monday 10th June 2013 Commons Chamber

[Mr Hammond]

That depends. We would expect a GoCo contractor to inject a certain number of senior staff who would be part of its package and who would be remunerated through its incentivised fee. Within the overall DE&S work force, getting the right skills in the right places will be part of the task for the management contractor. In some cases, that will mean recruiting at market rates, because at the moment we are haemorrhaging talent. The Under-Secretary of State for Defence, my hon. Friend the Member for Ludlow (Mr Dunne), has just given me an example where we had nine applicants for 70 commercial posts that have recently been advertised. We have to address the haemorrhage of talent from DE&S by offering market rates if we are to support our armed forces as we need to.

[Peter Luff (Mid Worcestershire) (Con)]

The Secretary of State will understand how pleased I am that he has announced the implementation of the major elements of the report that I commissioned from Lord Currie on single-source pricing regulations—a highly technical but really important subject. On DE&S, does he share my concern that there may be forces even in his own Department, and certainly elsewhere in Government, that may wish to frustrate the progress towards a GoCo? May I encourage him to reassure me that he will work enthusiastically and energetically, notwithstanding his caution, to overcome unreasonable, opportunistic or bureaucratic obstacles put in his way on the path to a GoCo?

[Mr Hammond]

I am grateful to my hon. Friend and happy to acknowledge the crucial part that he has played in the process that has led us to this announcement. I can safely say that yes, there will always be forces that resist any change that I look to make. We have to carry the case by making the argument, building it during the assessment phase and then presenting the value-for money case for the Go-Co against the DE&S+ benchmark comparator. I am absolutely clear that we have to make that case: there is no pre-judgment that a GoCo is the route we will follow. We have to prove that it provides value for money, and do so to some of the institutionally most sceptical forces—no names, no pack drill—in Government.

Oral Answers to Questions

Debate between Lord Hammond of Runnymede and Peter Luff

Monday 15th April 2013 Commons Chamber

[Mr Hammond]

Of course, cuts in defence budgets, not only in the UK but in the United States and, in fact, in nearly all developed countries, have presented huge challenges to defence industries. At the same time, many of their traditional export customers have developed their own defence manufacturing and even design and development capabilities. We are trying to work with the defence industry to give it greater visibility of our forward intentions, and to work with it to design greater export ability into its projects.

[Peter Luff (Mid Worcestershire) (Con)]

I congratulate my right hon. Friend unreservedly on his success in the herculean task of balancing the defence budget, but does he agree that if we are to keep that budget balanced, one of the things that has to change is the status of Defence Equipment and Support? Can he share with the House any clear indication of when he will announce his intentions in respect of that organisation?

[Mr Hammond]

My hon. Friend is right. [Interruption.] The right hon. Member for East Renfrewshire (Mr Murphy) correctly guesses that the announcement will be made shortly; “in the spring” and “before the summer recess” also spring to mind. My hon. Friend is right that if we are to deal effectively, and in a way that protects the best interests of the taxpayer, with large corporate entities which are able to scour the world for the top talent, we must be able to match them man for man across the negotiating table.

Oral Answers to Questions

Debate between Lord Hammond of Runnymede and Peter Luff

Monday 25th February 2013 Commons Chamber

[Mr Hammond]

We have done this one before. As I explained to the right hon. Member for East Renfrewshire (Mr Murphy), the £12.5 billion quoted by the NAO is a CAAS figure, based on its assessment of early summer 2012. In October, CAAS reported that it had downgraded its assessment of the contingency requirement to £4.4 billion, which is rather less than we have allocated in the budget.

[Peter Luff (Mid Worcestershire) (Con)]

This is my opportunity not to ask a question on the defence equipment programme that I believed I would have to ask for a fourth time at Defence questions, but instead to congratulate my right hon. Friend on the programme’s publication. What has been the reaction from industry and elsewhere to the welcome detailed information in the equipment plan, and to its clean bill of health from the NAO?

[Mr Hammond]

I am grateful to my hon. Friend, who is an aficionado of NAO reports. Anybody who reads NAO reports regularly will recognise that, in context, the report was supportive and favourable. However, it does not make us complacent—we still have a great deal of work to do. I can tell him that the response from industry has been favourable. I chaired a meeting of the defence suppliers forum the week before last, which commented favourably on the report and the guidance it gives in directing its investment in future capability.

Oral Answers to Questions

Debate between Lord Hammond of Runnymede and Peter Luff

Monday 22nd October 2012 Commons Chamber

[Mr Philip Hammond]

It is not for the Government to pursue arrangements for the future of BAES, EADS or any other company, but we will of course listen carefully with an open mind to any proposals brought to us by any of these companies. Where we hold a golden share—a veto share—we will allow any such transactions to proceed only where the United Kingdom’s vital national interests can be protected.

[Peter Luff (Mid Worcestershire) (Con)]

When does my right hon. Friend expect the National Audit Office’s assessment of the affordability of the defence equipment programme to be published?

[Mr Hammond]

Shortly.

Afghanistan (NATO Strategy)

Debate between Lord Hammond of Runnymede and Peter Luff

Tuesday 18th September 2012 Commons Chamber

[Mr Speaker]

I am grateful to the right hon. Gentleman. I would point out that his response is to the House, which is why it is perfectly proper for him to respond.

[Peter Luff (Mid Worcestershire) (Con)]

The Secretary of State has made it commendably clear that it is in our vital national interest to stick to the strategy that has been set in Afghanistan. When it comes to the security of British troops, does he take comfort from the words of Brigadier Bob Bruce, who will be leading the 4th Mechanised Brigade in its forthcoming tour of Afghanistan, who has said that we are sending to Afghanistan

“the best prepared and the best equipped…Task Force”

the United Kingdom has ever put into the field?

[Mr Hammond]

I am most grateful to my hon. Friend, who has been a stalwart supporter of the policy and the strategy, which, as I have emphasised this morning, has not changed. I am grateful to him for those words. It seems to me that although the Opposition protest their support for our policy, they are desperate to try to read into this ISAF operational notice a strategic change when there is no strategic change. It could not be clearer.