The Nimrod Review - Official Documents

The Nimrod Review
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Four organisations were involved in the acquisition of equipment:
a. The Equipment Capability Customer (ECC) who determined the future capability requirements.
b. The Defence Procurement Agency (DPA) which was responsible for procuring equipment capable to
meet the requirements.
c. The Defence Logistics Organisation (DLO) which was responsible for supporting the equipment that was
in service.
d. The Second Customers (Customer 2), namely the single service staffs who advised the ECC on operational
needs and the Front Line Commands who determined the availability and sustainability requirements for
in-service equipment.
The core of the new DPA was the newly-formed Integrated Project Teams (IPTs). The leader of each team
was answerable to a Director of Equipment Capability in the ECC with whom outputs and working methods
were agreed. In 1998, ten pilot IPTs were established for a three-month trial. The Nimrod IPT was one of
them. Because the project had begun under the Downey cycle, it was defined as a ‘legacy’ project. Towards
the end of the trial period, the then Secretary of State for Defence said: “The 10 pilot projects where we
have been trialling Smart Procurement techniques and the IPT concept are already starting to indicate new
savings running to several hundreds of millions of pounds over their life. They have also identified significant
opportunities to get equipment into service faster, or – for equipment already in service – improve its availability
and reliability.” 15 McKinseys, who were the retained consultants advising the MOD on the change to Smart
Procurement, advised that £2 billion of savings would be achieved in the first 10 years. 16
2004: Problems with Smart Procurement
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Six years on, however, the House of Commons Defence Committee (HCDC) Defence Procurement Equipment
Report stated in the 2003-2004 Equipment Report:
“Six years ago the Ministry of Defence introduced Smart Acquisition. Its objectives were
to procure equipment faster, cheaper, better. On almost all counts, it has failed to deliver.
In 2002–03 the top 20 defence equipment projects experienced in-year cost increases
totalling £3.1 billion. They also suffered time slippage – on average delivering a year and
a half late. More cost increases and time slippages can be expected when the 2003-04
figures are published. 17 ...The then CDP’s assessment of the DPA identified long running
systemic problems and a failure to implement the principles of Smart Acquisition. The CDP
said that ‘the major MOD procurements include the management of huge uncertainties
and whether or not we actually invest enough time in de-risking before we make a major
capital investment generally determines whether a project does or does not go astray.” 18
Giving evidence to the House of Common Select Committee on Public Accounts a few months earlier, the
Chief of Defence Procurement, Sir Peter Spencer said: “The situation is encapsulated by the National Audit
Office Report which recognises that the so-called Smart projects are doing better than the legacy projects,
but there are worrying signs that they are not going to deliver the results expected”; and not all seven
principles identified in the SDR had yet been put into place comprehensively. 19
‘Conspiracy of optimism’ (or cynicism)
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John Howe, Vice-Chairman of Thales UK, giving evidence to the HCDC regarding risk reduction in the early
parts of procurement programmes said:
15 Hansard Written Answers to Questions, 31 March 1999. Column 678.
16 McKinsey and Co “Transforming the UK’s Defence Procurement System Final Report”, 20 February 1998.
17 House of Commons Defence Selected Committee: Sixth Report of Session 2003-04, published 28 July 2004, Summary.
18 Ibid, paragraphs 21 and 23.
19 Minutes of Evidence of Giving of House of Common Select Committee on Public Accounts Questions 216-217.