MOD Logistics (Bicester)

Tony Baldry Excerpts

Wednesday 18th April 2012 Westminster Hall

[Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC)]

I am pleased to have secured this debate. I raised the issue last year when I asked the Prime Minister about a pair of £44 boots that MOD logistics at Bicester had shipped to Northern Ireland at a cost of nearly £800. That is not the only example of MOD Bicester’s excessive spending, excessive pricing and excessive commissioning that has come my way in the intervening months. The scale of management error is so large and so endemic that, to my eyes, it almost looks systematic. In a nutshell, we believe that the logistics operation is having its costs inflated in order to hive it off into the private sector. I also believe that MOD logistics is being fattened for that purpose.

[Tony Baldry (Banbury) (Con)]

The hon. Gentleman uses the word “we”. Unless he is becoming very royal, who does he mean when he says “we”? For whom is he speaking when he makes these attacks on my constituency?

[Mr Llwyd]

First, I am making attacks not on the hon. Gentleman’s constituency, but on some people who might not be completely open in the way in which they deal with matters at MOD logistics at Bicester. Secondly, those who advise me are included in the “we”—I do not pretend to be of any royal stock. I hope that I have made my position clear. The hon. Gentleman knows that my argument is not with him or his constituents, but with the MOD logistics department, which is the whole purpose of this debate.

I believe that the officials responsible for this are perhaps positioning themselves to make a fortune out of it in due course; and that, to make that operation less apparent, misled the Minister, who has in turn, unintentionally, perhaps misled the Commons. I have evidence and a confession from the head of logistics, who said on Monday night that all the information that I had been asking for over the last six or eight months was available, but had been declared to the Minister to be unavailable. There was a repetition of the word “unfortunate” when he said that the Minister had been misled.

The same official told me that there are plans to restructure the department, which may be announced in the coming weeks, so the debate is timely. I did not ask for this debate to make any particular political point, nor do I want to embarrass the Minister, who I know is a man of integrity and who may well have been placed in the unhappy position of unintentionally misleading Parliament on one occasion at least. He did indeed correct himself in due course, which is what I would expect of him.

This is a debate about administrative propriety upon which all parties in this Chamber agree, about a specific exercise in holding the Government to account and about the spending of public money. It is also a debate that asks, “Does Parliament have any power to hold the Government to account? Does the Government have the necessary control over their civil service in this area, or are we all to be treated as nothing more than a nuisance by officials who spend £27 million a year of the public’s money?”

I suspect that what we have here may be a fraudulent operation. It needs urgent and perhaps unusual treatment by the Minister’s office. My suggestion is that the Minister appoints a small team of two or three who will be given access for 48 hours to the TMS—transport management system—computer system that records the logistics operation and who will then report to him in due course. They should be the Minister’s own team, because there are some in senior management positions who are perhaps not worthy of complete trust. Information has been concealed, withheld and manipulated. Those people now have no incentive to do anything else. Most important, there is a proposal for further restructuring

“to bring together the component parts of the logistics organisation into site-based groups.”

That sounds like a return to the structure before the last restructuring. There is also a rumour of a management buy-out. The idea that the same management who created this mare’s nest can then profit from it will cause revulsion in anyone not directly benefiting from it.

Before I lay out a summary of the case, I ask the Minister for assurances that the people, however senior, who have supplied me with information will not suffer from proceedings by their managers or from other parts of the MOD hierarchy. I have no doubt that the Minister will respond to that in due course.

Military logistics planning is usually conducted in acronyms and the language of consultants. For the convenience of the House, I will present the case in layman’s terms. Ministry of Defence logistics is the term used for transporting equipment for the Army, Navy and Air Force round Britain and overseas. The main southern distribution hubs from which supplies originate are Bicester and, secondarily, Donnington. Bicester stores and sends equipment to our forces nationwide and worldwide, via RAF Brize Norton or Heathrow. It was from Bicester that the equipment for Iraq was delivered, for example. The main day-to-day task in peace time is resupply: Bicester transports everything from ship engines and heavy machinery to documents, toilet paper, body armour and ration packs and, yes, the famous boots going to Northern Ireland. There are flight steps from the Falklands, equipment, kit, documents, jiffy bags and pallets—all are ferried round the UK and round the world largely from the two centres.

Let me describe succinctly the operational structure before and after the restructuring—how it was done then and how it is done now. Before restructuring, supplies were transported out from Bicester in one of three classes of vehicle: a Luton van size; a removal truck size and a standard articulated lorry—a 44-tonne truck. Those vehicles carried supplies from Bicester to one of the regional centres around the country, from where supplies were sent on in smaller vehicles to their final destination. It is the hub system by which all major transport companies, such as FedEx, United Parcel Service and the Royal Mail, work. There is a universal logic to the system: the large trucks carry larger quantities of goods longer distances more cheaply, and the smaller vehicles conclude the delivery with a short local journey.

That conventional model was abandoned in 2008 and a new system was put in place. The managing director of Bicester was at that time, and is now, Steve Brannigan. He decided to close these regional distribution centres, to reduce the fleet and number of drivers, and to make up the shortfall in in-house capacity by greater use of private hauliers, contractors and couriers—generically called third party logistics, or 3PL for short. As a result of that new structure, it was said, the cost of the regional distribution centres—nearly £4 million a year—was saved. In a letter dated 28 July 2011, the Minister describes those as “net savings”, but my understanding is that that is very far from the truth. Again, I stress that I do not impugn the hon. Gentleman’s veracity over any action that he has taken. The crucial figure has been concealed and withheld.

What is the total sum paid to private transport? That figure is not yet forthcoming. We are told the total budget for transport, but not the total budget for private transport, and I believe that it is much higher than has been reported by senior people. The restructuring of the system reduced the number of in-house trucks and drivers and contracted their replacements from outside the Department. The idea behind the restructuring was to outsource much of the driving work and make efficiencies by competitive tendering. Palletways, the trucking firm, now does much of the work that the MOD used to do itself. Thus Bicester sends four or five articulated trucks carrying the supplies that it needs to have delivered to the Palletways centre in Staffordshire. Palletways then does the job that Bicester used to do in precisely the same way that Bicester used to do it, by sending the supplies out to its own regional distribution centres.

It is said that contracting out has a good reputation in management circles. The use of private contractors promises greater flexibility, lower overheads and more competitive tendering. Paid staff are not idle when there is no work. Contractors are assumed to have a commercial incentive to work harder than employees as their position is less secure. That is the theory. Often it works, but it does not translate into good practice automatically.

Has the restructuring of Bicester MOD logistics been a success? Has the evaluation process worked? The results should be apparent in the accounts, including the total operating sum spent on logistics before restructuring and the total operating sum afterwards. Those figures have been held very close by the Bicester MOD logistics management. In fact, they refuse to reveal them. Why is that? I believe that it is because the total cost of private transport makes a nonsense of the outsourcing, that total third party logistics costs show that no savings have been made, and that the restructuring has actually resulted in net losses.

It is easy to see how private contractors would struggle to match in-house costs: private sector drivers have a higher cost per hour than public sector drivers; there is the cost of operating licences and there is VAT on agency driver fees. Compare that with the defence infrastructure of bases and personnel, which can be used intelligently at low, or even no, marginal cost. There is also the need to transport MOD supplies to the main contractor’s depot 75 miles away from Bicester.

Those factors prompt questions that need to be answered. Did the restructuring work? Have the new arrangements saved money? Were the highly paid consultants who devised the new system worth their fee? The fact is we do not know whether the business operation has been analysed to show whether it works better or not. The figures have been arranged to show a financial benefit from the new structure. Real-time reports from the computer system, as well as common sense, present a very different picture.

The Minister will remember the question that started this process off last year; it was about the famous pair of boots that were transported from Bicester to Northern Ireland at a cost of almost £800. At that point, we were trying to establish the ongoing costs of the restructuring and we asked what those costs were. However, the costs of couriers were left out of the answer, when they are about a third of the total. The Minister said:

“I have been categorically assured about the omission of the courier costs.”

He also said that the error was

“a result of human error rather than any intent to mislead”.

That is what the Minister said.

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[Tony Baldry (Banbury) (Con)]

The hon. Member for Dwyfor Meirionnydd (Mr Llwyd), like me, is a lawyer, and his speech was long on assertion and short on evidence. Indeed, it seemed more appropriate for the inside back pages of Private Eye than as a sensible contribution to Hansard and parliamentary debate.

It might be convenient for the House to know that I have represented Bicester for nearly 30 years—some three decades. During that time, the logistics depot has gone through a number of names, so for convenience I shall refer to it as the Bicester depot.

The Bicester depot has working at and within it a number of trade unions: Unite—previously the Transport and General Workers Union—and the Public and Commercial Services Union, or PCS. Over the years, I have developed a practical working relationship with them, and I stress that because they are clearly not necessarily political friends of mine. The convenor of the Whitley council at Bicester and of the International Telecommunication Union, Les Sibley, has been my Labour opponent at the past three general elections, and the hon. Gentleman can rest assured that if either Unite or PCS thought that something untoward was happening at Bicester, they would be shouting it from the rooftops.

I wonder why an hon. Gentleman from a Welsh constituency is seeking to investigate, by assertion, what is happening in a military depot in Bicester. The hon. Gentleman did not answer when I asked him who the “we” was who had been advising him. The answer probably lies in the first lines of the Library briefing for the debate. The first newspaper article in the briefing, from the Oxford Mail, has the headline, “Bicester can be ‘heart of MOD’”, and continues:

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

I am pleased that the hon. Member for the Wrekin is here because I would not want to make these comments without him being present.

[Alison Seabeck (Plymouth, Moor View) (Lab)]

It is Telford.

[Tony Baldry]

I apologise: the hon. Member for Telford (David Wright). At the moment, there are a number of logistic centres for the Ministry of Defence, including one at Donnington. It is no secret that the Ministry has for some time been considering whether Donnington, Ashchurch and other logistic bases should be consolidated, and it is no secret that my submission to Ministers has always been that if one is to consolidate defence logistics, the logical place—the only place—to do so is at Bicester. Bicester is in the heart of the country, near Brize Norton, which is now the major air gateway, and the M40. The east-west rail link is being developed, which will connect Southampton to Felixstowe. Given all that and the Bicester’s internal railway connections, it is the ideal location in which to consolidate defence logistics. That is not just my view; it is that of the trade unions at Bicester.

Richard Kelsall, who represents the PCS, says:

“Over many years and many in-depth studies it has been concluded that Bicester is the only site that can fulfil the MOD’s strategic aims; meeting its customers’ needs whilst safeguarding the Public purse.”

I hope that the Front-Bench spokesperson, the hon. Member for Plymouth, Moor View (Alison Seabeck) will listen to this with care. Les Sibley who, as I said, has been the Labour parliamentary candidate for three successive general elections and is a former mayor of Bicester, a current district and town councillor and a former county councillor, says:

“The pivotal role that MOD Bicester has played throughout its long history in its provision and delivery of services to the Armed Fortes worldwide over many decades is well documented.

The MOD is a large organisation and by the very nature of its role, it is inevitable that sometimes mistakes happen because we are not infallible and as such we rectify any mistakes as quickly as is humanly possible.

We have built an enviable reputation of expertise over time, and this expertise is still readily available to the MOD for future Logistics and Distribution purposes. Therefore, the most logical way forward is that these attributes can be offered to the MoD by the loyal and long serving civil service workforce whenever called upon. By utilising these skills together with the centralised location of MOD Bicester offers a winning formula for future excellence of delivery to the Armed Forces when considering any future operational requirements.”

I fully recognise that Members of Parliament who represent Donnington, Ashchurch or other locations and depots will have different arguments. I accept that, but in the context of this debate my point is that the House can be assured that if the trade unions at Bicester felt that something was systemically wrong with how the depot was being run they would be making it clear, not just to me but to Labour Front-Bench colleagues—people such as the hon. Member for Birmingham, Erdington (Jack Dromey), who used to be assistant general secretary of the Transport and General Workers Union and visited Bicester regularly during that time. I am quite sure that if the trade unions felt that something was going systemically wrong at Bicester they would have made it clear to leading members of the Labour party and to the Labour Front-Bench team.

[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.

[Mr Llwyd]

It is no part of my function to rubbish Bicester. I came across something that looked doubtful, and I raised it appropriately. Let us be fair: the hon. Gentleman was with me when I met the head of logistics. When I put the accusations to him, he said, “That may well have happened, yes; we’re not perfect,” and so on. They are not groundless. By the way, I am a Privy Counsellor.

[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?

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[Alison Seabeck]

My hon. Friend makes a good point, which I will come back to later.

The Government must be concerned that other factors, such as the drop in land values, are not helping their decision making, and nor is the fact that parts of the Bicester site are contaminated. Such factors have contributed to the MOD’s apparently defensive mindset over the future of the site and the work that goes on there. However, there appears to be much more behind such concerns, as we have heard today.

As the hon. Member for Banbury made clear, we need evidence, so transparency is hugely important. We need transparency in the relationship between the civil service and Ministers. Obviously, there are constraints regarding commercially sensitive material, and there are wider security concerns. However, one or more whistleblowers have come forward, and the right hon. Gentleman has asked written questions.

[Tony Baldry]

The “whistleblowers” do not come from Bicester; indeed, they would not need to be whistleblowers. I can assure the hon. Lady that if those working at Bicester thought there was a concern, they would be on the telephone to her, as fellow members of the Labour party, explaining that something was wrong.

[Alison Seabeck]

The hon. Gentleman has a fair point: if such people were trade union members, they might well have come to members of the Labour party. However, I do not know who has spoken to the right hon. Gentleman, and I assume the hon. Gentleman does not know either. I am talking generally about people who feel they have seen something in their workplace that is inappropriate or that constitutes extreme waste. Clearly, the right hon. Gentleman, from his perspective, has not had adequate answers to the written questions he tabled. This process started more than a year ago, and these issues were highlighted a year ago, so why do some of these things appear to have been pushed under the carpet?