MOD Logistics (Bicester)

Dai Havard Excerpts

Wednesday 18th April 2012 Westminster Hall

[David Wright (Telford) (Lab)]

I am the MP for Telford. Donnington falls within the constituency of the hon. Member for The Wrekin (Mark Pritchard), but is about 150 yards from the boundary of mine, and many of my constituents work at what I will call the depot at Donnington, mirroring what the hon. Member for Banbury (Tony Baldry) calls the depot at Bicester. Clearly, he is making a pitch for Bicester, but I argue that Donnington is an ideal location for the work.

It is important that the right hon. Member for Dwyfor Meirionnydd (Mr Llwyd) has secured this debate. I am interested in the fact that, if further changes are made to how logistics operate in this country, they must be considered on a level playing field. If we are to make decisions about the future location of logistics work, we must use information that is even and level across the sites and easily understandable. We must be able to compare sites properly. I hope that the Minister will confirm that that will be done.

[Mr Dai Havard (in the Chair)]

Order. Before the hon. Gentleman responds, I remind hon. Members that interventions should be short.

[Tony Baldry]

I do not think that the Minister or any of us would disagree with that. The point that I am making is that the hon. Gentleman who introduced this debate did so on the basis that systemic failures and abuses of practice were occurring at Bicester. My response is that he has not produced any evidence. Further, if there were any such evidence, I assure him that that it would have been drawn to the attention of management, politicians, the House and me by the trade unions and that it would have been investigated.

I understand, of course, that in the run-up to ministerial decisions about the future of defence logistics, there are some around the country who will have an interest in rubbishing Bicester, but I am sorry that it has been done in such a way. I will come to what I think would have been the correct way to deal with the matter.

[Tony Baldry]

I apologise if I did not refer to the right hon. Gentleman as such. He should not be quite so touchy. What Neil Firth said at that meeting was, as everyone would concede, that thousands of items go out from Bicester each day, and errors are always possible, particularly as priority is set not by Bicester but by the requesting unit.

A little while ago, a constituent of mine, who left Bicester shortly afterwards on voluntary agreement, made allegations not dissimilar to those made by the right hon. Gentleman, relating to boots and one or two other items. He did not assert that there were systemic failures at Bicester, but he thought that occasionally, boots and other things were made more costly than necessary. I immediately took up the matter with Ministers in the Ministry of Defence, and the Minister for the Armed Forces, the hon. Member for North Devon (Nick Harvey) responded. In fairness, in response to my letter, a full investigation was carried out at Bicester. The Minister for the Armed Forces said, perfectly fairly:

“Every day, consignments and routes are developed to ensure that freight carriage is optimised and the use of commercial hauliers balanced against in-house resources. Of course, from time to time, routing errors do occur, but this must be placed in context. On a daily basis the JSCS”,

joint support chain services,

“handles between 8,000 and 10,000 transactions, of which the large majority are delivered on time and in the most cost-effective way. Indeed, the costs of transport have been reduced by £10 million in the past two years against 2008 operating costs and the level of service improved from a success rate of 80% of transactions completed on time based on 10 working days to a success rate of 95% based on seven working days.”

Suggestions were made about agency staff. The Minister for the Armed Forces said:

“Of course there are occasions when agency staff will be required to supplement existing staff resources, for example to respond to increases in demand and to meet operational needs. In such cases, existing MOD-wide commercial arrangements are used which ensure that agency staff are employed at the most cost-effective rate.”

He went on to conclude:

“JSCS is an operational organisation that exists to meet the often urgent requirements of the armed forces. The organisation, therefore, has to balance these demands against achieving value for money for the taxpayer. The 2009-10 annual report and accounts clearly demonstrate that operating costs are now 28% less than they were six years ago, but that service delivery has significantly improved.”

I suspect that if every public service could show a 28% improvement over six years, we would all be grateful.

There are two issues in respect of Bicester that I should like the Minister to hear. First, I genuinely believe that defence logistics should be consolidated at Bicester, for the reasons that I have said. I also suspect that, as part of that, the private sector will increasingly need to be involved, as it is currently involved, not least when investing in new logistics sheds, warehousing and equipment at Bicester. However, age is an issue. Bicester’s existing work force are loyal and have worked there for a long time, and being civil servants is an important part of their lives. I hope that if changes are made at Bicester, transitional changes will be possible whereby those with civil service status can retain it if new private sector investors and partners start to work more with the MOD on logistics handling, support and delivery. I am sure that that is possible.

I invite the right hon. Member for Dwyfor Meirionnydd to come to Bicester. He is welcome to visit, and to come with me to meet the trade unions of Bicester, so that he can put his allegations and assertions to them and the work force at first hand. I think that he would be interested in their detailed response, but he would also see the huge land footprint at Bicester. It has a lot of surplus space that is not being used as effectively as it might be. I have no idea why, in the first world war, such a huge area of land was taken for those purposes at Bicester. The rumour is that it was to resist zeppelin attacks. That is a matter of history, but we have an enormous amount of space; we are at the heart of the country; and we have excellent rail and road connections.

Rather than an investigation into unfounded allegations about what is said to have gone wrong at Bicester, it would be more helpful to have a review of how to get the maximum potential for the country out of the Bicester estate, both for the defence industries and in terms of releasing surplus land for other commercial and residential use. The potential is considerable.

I do not think that the assertions made by the right hon. Gentleman have any substance. There is no smoking gun. In an operation as large as that at Bicester, things will occasionally go wrong, but I suspect that other logistics operations such as DHL, the Post Office and Amazon are not always perfect. I do not think that the percentage of error is greater in defence logistics than in any other major logistics operation.

To conclude, I return to the first line of the Library briefing for the debate:

“Bicester’s MP has called for the Ministry of Defence to consolidate its UK logistic operations in Bicester.”

[Mr Dai Havard (in the Chair)]

I call Alison Seabeck. Are you right hon?

--- Later in debate ---

[Peter Luff]

To be fair to the hon. Lady, I did not ask. I will check that, but I am sure that they would have been drawn to my attention had they been made. It is a fair question to ask, and I cannot give her a guarantee. There has been no Cabinet Office involvement, though; I assure her of that.

I will not arbitrate on Donnington and Bicester today. I have been to Bicester. I shall go to Donnington in July. I shall be even-handed, entirely, I promise both the hon. Member for Telford (David Wright) and my hon. Friend the Member for Banbury (Tony Baldry). I shall not be arbitrating there. I think that I shall be able to give the hon. Member for Plymouth, Moor View the reassurance that she wanted on all the fundamental points she made in her speech, because this is a bipartisan issue.

Successive Governments over decades have dealt with problems with logistics, which is often the Cinderella of defence, and to which insufficient political attention is often given. That is one reason why I welcome the debate. It is good that the subject should be exposed in the House, and good to have the opportunity to record some of the remarkable achievements of people who work in logistics, often in adverse circumstances.

I think that I detected in the speech of the right hon. Member for Dwyfor Meirionnydd—if I am wrong I apologise to him straight away—an underlying hostility to the role that the private sector can play in delivering defence outputs more effectively. We, like the previous Government—it is a bipartisan policy—have found that using the private sector appropriately enables significantly better outcomes to be achieved for defence. Many of the things that we are doing in the logistics operation build on decisions made by the previous Government. We understand the role that the private sector can play.

I assure the right hon. Gentleman that no information that it is proper to put in the public domain, within the limits of commercial confidentiality, has been concealed. Detailed information is available, for example, on each and every contractor involved—I think that 17 are on the list—including exactly how much money they are paid and exactly what they do. I have written to members of the Public Accounts Committee with that information. I have the schedule here, and if we have time before the Division in the House is called, I may even read out all 17 names, what the contractors do and how much they were paid in 2010-11. I shall make sure that the information is available to the right hon. Gentleman after the debate.

No information is concealed. Indeed, the National Audit Office rightly goes over logistics regularly, and another NAO report is due out in the fairly near future. If the NAO has not spotted such things as the right hon. Gentleman is concerned about, and all the information is genuinely available, I am frankly suspicious about whether the allegations have any foundation. However, I will double check. Question after question has been answered, and nothing that it would be improper to conceal will be concealed. Some information, as the hon. Member for Plymouth, Moor View was kind enough to note, sometimes must be kept private for reasons of commercial confidentiality. That is frustrating for politicians and democrats, but sometimes it is important. However, we shall be as open as we possibly can.

I listened carefully to the right hon. Member for Dwyfor Meirionnydd and will address some of his points in my speech—I have already done so in part; but I want to explain a little more about logistics commodities and services at Bicester, and the wider operation, to put his remarks in context. The organisation provides remarkable support to the UK armed forces, particularly to those serving on deployed operations, not just in Afghanistan but particularly there. LCS Bicester is one of three main storage and distribution depots for non-explosive stores, operated by Defence Equipment and Support. The other two are LCS Donnington, in Shropshire, in the constituency of the hon. Member for Telford, where I am going in July, and LCS Dulmen, in Germany. The role of those sites is to receive, store, maintain, issue and distribute non-explosive matériel on behalf of the UK armed forces and other Departments.

Last year, the National Audit Office published a report called “The use of information to manage the logistics supply chain”. In that report, the NAO—it is not I, a Minister, saying this, but the NAO—acknowledged the improved performance of the MOD’s supply chain and its effectiveness in supporting our forces in Afghanistan. In particular, the NAO’s report noted that the operational supply chain is more complex than the standard industry supply chain, which is not something that people often acknowledge.

To pick up on the comments made by my hon. Friend the Member for Banbury, the UK’s delivery performance is comparable with that of commercial operators. We are doing as well as the commercial sector, which is a great tribute to all those involved, and a significant achievement. That is why I am suspicious about the allegations made by the right hon. Member for Dwyfor Meirionnydd.

The defence equipment and support logistics commodities and services operating centre, of which MOD Bicester is a part, is key to the successful delivery of those services. The defence inventory is huge, complex and comprehensive. As at 31 December 2011, the gross book value of the inventory, excluding explosive stores, was about £29 billion. That represents 500,000 different line items, covering everything from clothing to medical supplies and engine parts. Those items are distributed to approximately 3,500 sites across the UK and around the world. Up to 8,000 issues are sent every day—some 1.2 million every year—ranging from small washers to aircraft wings. That is indeed a huge and complex operation. Given the sheer volume of items moved by the organisation—I am in no way complacent, because we do not tolerate error, either—it is inevitable that some mistakes will be made.

Turning to one mistake in particular that the right hon. Gentleman has made much of in the past, there is an appropriate saying: a lie is around the world while the truth is getting its boots on. Let us look at those boots once more. An item that should be routinely requested is sometimes marked as urgent by the unit itself; or items may be sent individually when they could be packaged together. That is normally the fault of the requesting unit.

In the specific case of the boots couriered to a unit in Northern Ireland, which the right hon. Gentleman raised at Prime Minister’s questions, that is exactly what happened. The unit used the wrong process to order the boots. It realised the mistake too late. I am not going to allow civil servants to override front-line decisions and say, “We do not think that is urgent. The officers in charge might think it is urgent, but we disagree.” That would not be right. The responsibility lies with the unit to use the appropriate requesting process.

What happened in this instance was a regrettable mistake, which the unit tried to correct too late. It was not corruption; it was not fraud; and it was not improper. It was a straightforward human error. I hope that the right hon. Gentleman will not repeat his assertion. I am entirely satisfied that there was no fraud involved at all. The mistake was made by the Army, which it regretted and tried to correct.

I cannot guarantee that such mistakes will not happen again—we are all human beings who have feet of clay and who make mistakes—but I am absolutely confident that this is not a systematic problem. The right hon. Gentleman made that assertion in his speech, but I dissent from that view firmly and absolutely.

LCS Bicester is a well-run operation, which I am sure is also true of Donnington. The restructuring of the former Defence Storage and Distribution Agency—DSDA, of which LCS Bicester was a part—has produced significant savings. The FDSCi—future defence supply chain initiative—report, which followed the DSDA restructuring, was published in November 2009 by the previous Government and presented to the House, and I would be happy to send the right hon. Gentleman a copy. It forms the basis of my remarks today and represents more information in the public domain, which I hope will reassure him.

Between 31 March 2008 and 31 March 2012, the operating costs of DSDA and its defence equipment and support units fell from £285 million to £231 million a year. That represents a reduction of nearly 20% over four years. When calculated on a like-for-like basis, taking into account inflation, the cost of improved service and other exceptional one-off costs, the saving is 26%. That is an impressive achievement for which the hon. Member for Plymouth, Moor View should take her fair share of credit, on behalf of the previous Government, who initiated some of the changes.

Similarly, the cost of transporting MOD equipment has fallen by 21% over the same five-period period. I repeat that I have the detailed information on the use of companies and couriers that I would be happy to share with the right hon. Member for Dwyfor Meirionnydd. I will resist the temptation to read them all into the record, because it is a long list. I am surprised that he highlighted Palletways in particular. I assure him that there are people on the distribution list who get paid more than Palletways. Again, on a like-for-like basis, allowing for the impact of inflation and so on, the saving on the transport costs is 29%. It is 29% cheaper in real terms, which is a big achievement. A key performance is the average cost per transaction—the processing of an issue of receipt. The equivalent cost has fallen from £103 per transaction for the financial year ending 31 March 2008 to £79 per transaction in the year ending 31 March 2012. That is an increase in efficiency of 23%. Those are good and impressive figures.

Over the same period—I appreciate that this is a good news, bad news story—manpower numbers have reduced by more than 2,100 posts and the service to the customer has significantly improved. The average customer wait time—this is a really impressive statistic—has fallen from about 49 days to four days. That is an important figure, considering that our armed forces are heavily committed in operations in, for example, Afghanistan. I pay an even-handed tribute to both Bicester and Donnington in that respect. The operation of LCS Bicester and the two other main storage and distribution depots is a genuine success story. If there were an hon. Member for a German constituency and if they were present, I would congratulate him or her as well, although storage and distribution represent only one element of the management of our equipment.

We are proud of the spares and equipment availability in operational theatres such as Afghanistan, as it ensures that commanders are not constrained in conducting their missions. The same could be said for the manner in which we supported Operation Ellamy in Libya, which was another success for a logistics operation. Support for such operations must be our first priority.

Nevertheless—this is the scandal to which I alluded in my opening remarks—there is no disputing the fact that the defence inventory is, and has been for many years, too large in both value and volume and that any avoidable delay in reducing it will create many future challenges. We have to deal with the issue. There are a number of reasons for this situation. Many items are bespoke and have been purchased in bulk, based on an estimate of need stretching across several years, even decades in some cases. Other items are purchased with a view to ensuring that sufficient stocks are available to deal with a sudden surge for a short-notice or large-scale military deployment. However, that is far from the whole story.

There is a legacy—I am not making a point about the previous Government—of under-investment in the information systems to track and manage stores. The truth, as I said during my opening remarks, is that logistics is the Cinderella of defence, and that is manifest in this case. It does not seem to be a priority for investment, but it should be. Too often, the Department is unable to locate with confidence what it holds. It thinks and is reasonably sure that it has something, but it just cannot prove it to accounting standards quality when it should be able to. Moreover, it has often held too much just in case something happens.

I visited some of the warehouses in Bicester recently—I met my hon. Friend the Member for Banbury immediately before I saw them—and they are jaw-dropping. Stuff is being held that simply should not be held and it should be disposed of. The £29 billion stock holding is far too high. Too much inventory is stored for too long and at too great a cost to the taxpayer.

This is not just a British problem. Army surplus stores exist around the world. The situation seems endemic to defence, but we must cope with it. The inventory is large and it is growing, and we are determined to tackle it head-on. We have not been idle. The Department is making progress in improving inventory disposal through the stock transition programme, which was set up to meet Treasury targets to reduce inventory holdings in our main storage and distribution depots. We have arrested the rate of growth—it is still growing—in the defence inventory as a result of those disposal measures, and we are committed to bringing purchasing activity under much stricter control.

In December 2010, I announced to the House the introduction of the future logistics information services project, which represents a step-change improvement to the quality of logistics information available to the armed forces. It will ensure the long-term delivery of operationally essential logistics information to both the MOD and industry, and the significant financial efficiencies will contribute to the Government’s strategic deficit reduction programme, without reducing operational capability.

One of the logistics information systems that will be managed under FLIS is the management of the joint deployed inventory, or MJDI—I love these acronyms—which is now up and running and has reached its initial operating capability. MJDI will bring huge improvements, enabling the entire deployed inventory—the inventory that is overseas on service—to be seen on one system. It will encourage better use of stock, which in turn will lead to reduced repeat demands, lower stock levels and saved costs in storage and transport, all generating improved operational performance. Importantly, it will enable operational commanders to make informed decisions based on accurate and timely information.

To give a specific and important example, a four-year Bowman radio equipment asset management improvement programme was introduced in 2010. Since then, we have made good progress and a coherent and auditable inventory baseline has been established. It is not rocket science, but it is hugely important and we are doing it. Process improvement in the way in which the data are captured and managed will in future enable the Department to identify and track assets more effectively. This is really important stuff.

We recognise the importance of having a comprehensive corporate strategy to tackle the myriad complex issues, and have commissioned the development of a strategic plan for the management of the defence inventory. It is intended to deliver the correct conditions to incentivise and mandate improved inventory purchasing and disposal behaviours. We have a lot of attics at the MOD, and they are too full of stuff. We need to get rid of stuff, as well as acquire stuff more thoughtfully. The strategic plan is a significant piece of work and it has just completed phase 1 of its milestone.

The financial savings and efficiencies secured by LCS Bicester and all the storage and distribution sites over the past five years are impressive, but, as I have already said, there is a long way to go if we are to provide the best possible support to military operations and maintain the agreed quality and service to our armed forces.

In response to the hon. Member for Plymouth, Moor View, in August 2010, I announced that DSDA would renounce its agency status and that a new organisation, the logistics commodities and services operating centre, which brings together the key commodities purchasing, storage and distribution elements of the Department into one organisation, had been created. LCS Bicester is part of the LCS operating centre. The primary role for LCS is to provide support to military operation and force generation by undertaking procurement and inventory management of all non-explosive commodity items, including food, clothing, fuel and medical supplies; the storage and distribution of those commodity items, together with all other non-explosive stock across defence; the disposal of surplus MOD equipment and the operation of the British Forces Post Office.

LCS is currently developing a transformation project, which aims to consider how we can improve further our inventory management and stock control, rationalise current stock holdings—we are trying to thin them down, rather than fatten them up—and improve and rationalise storage infrastructure. That will include releasing surplus for disposal, which will be of interest to the hon. Member for Telford and my hon. Friend the Member for Banbury. The project will also seek to improve commodity procurement and logistic processes, and optimise the size of the LCS organisation itself. The storage infrastructure requires investment to improve its condition and to rationalise the numerous dispersed locations.

Should the programme be taken forward—frankly, I expect that it will be—the first step will be to initiate an assessment phase, to explore the alternative delivery models available and whether they represent value for money, which I think addresses one of the questions asked by the hon. Member for Plymouth, Moor View. The work would explore two options for delivering support in the future: industry integration and an in-house developed value for money benchmark. That review will consider all existing facilities. I emphasise that it is far too early to say what the implications will be for individual sites and that no decisions have been made.

In advance of the work at Bicester, however, a planning application for the retained footprint and for the sale and development of surplus land has been submitted to Cherwell district council, to prepare the way to the approach to defence logistics and to secure the value of the surplus land.

We must not forget that it is the people who work at LCS Bicester, Donnington and the other sites associated with it who make logistics operations succeed. The efficiencies and improvements that have been implemented at those sites are testimony to the quality of the people whom we employ, and I am grateful to them for what they do. I have met many of them and know that they are focused on providing the best support to our service personnel deployed on operations. I fully understand the vital role that they play. They are rightly proud of what they have achieved, and they continue to achieve a great deal.

I am enormously grateful for the commitment and dedication of all those who work to ensure that our armed forces receive the best logistics support possible. It is our job to ensure that the right framework is in place to make it work. That challenge has been ducked for too long—for decades, not just in recent years. Indeed, arguably we are addressing decades of neglect in these issues, and it will take time to deal with them. The change will come, but it will come slowly and incrementally. I am determined that we should improve the way that we do things.

If the criticisms made by the right hon. Member for Dwyfor Meirionnydd contain any significant truth, I will, of course, want to address them very honestly and frankly. We need to do the best we possibly can to ensure that our armed forces can fight and defend our freedom as effectively as they have done in the past.

[Mr Dai Havard (in the Chair)]

I suspend the sitting until 4 o’clock or until such time as we can reconvene if Divisions take place in the House.