The Nimrod Review - Official Documents

‘Bow wave’ has knock-on effect
14.28
Chapter 14 – Procurement
In my view, these figures are a matter of great concern. They give rise to the spectre of a further ‘bow wave’
of deferred financial problems which dwarfs anything faced in the late 1990s. My particular concern, for
the purposes of this Report, is the knock-on effect which such a ‘bow wave’ might again have on the future
integrity of safety and airworthiness in the MOD, in the event of further punishing rounds of stripping out
or squeezing costs from In-Service Support and the concomitant change, confusion, dilution and distraction
that this can bring, as in the past.
Salient points in Bernard Gray’s Report
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I asked Bernard Gray what he had found and he told me the following:
(1) The MOD has a substantially overheated equipment programme with too many types of equipment
being ordered for too large a range of tasks at too high a specification. This programme is unaffordable
on any likely projection of future budgets.
(2) This overheating arises from a mixture of incentives with MOD. In particular, the Armed Forces
competing for scarce funding quite naturally seek to secure the largest share of resources for their own
needs and have a systematic incentive to underestimate the likely cost of equipment and downplay the
technical difficulties. Industry and the Armed Forces have a joint vested interest in sponsoring the largest
programme at the lowest apparent cost in a ‘conspiracy of optimism’. This ‘conspiracy’ gives rise to an
over-large programme, and the deep reluctance to cancel projects means that these pressure are not
relieved.
(3) When this over-large and inflating programme meets the hard cash totals that the MOD has been
allocated each year, the Department is left with no choice but to slow down its rate of spend on
programmes across the board.
(4) The result is that programmes take significantly longer than originally estimated, because the
Department cannot afford to build them at the originally planned rate. They also cost more than they
would otherwise because the overhead and working capital costs of keeping teams within Industry
and the MOD working on programmes for a much longer period soaks up cash. The MOD also has to
bear significant costs in running old equipment because the new equipment is not yet ready for service.
This builds up an increasing bow wave of risk as the years go by, compounding the pressures on the
equipment programme and forcing cuts in other areas.
(5) In reality, the bow wave allows the MOD to maintain a position that a whole variety of Defence
capabilities are in the process of being procured. This feels reassuring to the country about the size and
scope of Britain’s Armed Forces, but behind this comforting thought is the cold fact that the budget
does not exist and has arguably not existed since the end of the Second World War. The policies of
successive governments, and a lack of political will to present to the electorate the unpleasant reality of
the position, has been a significant force behind this phenomenon.
(6) The global political map has shifted substantially in the last decade but the MOD’s strategic framework
has not kept pace with that environment. Even the authors of the SDR felt it was a framework that
would only last for about five years. They fully expected it to be replaced by a wholly new SDR in
2002-2003 and that was before the events of 9/11 changed the world. This out-dated road map left the
MOD poorly equipped to conduct two simultaneous major conflicts (namely, Iraq and Afghanistan).
(7) Similar pressures to those that exist in the new equipment programme also exist within the support of
in-service equipment.
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