Defence Reform Bill — Second Reading

Part of the debate – in the House of Lords at 5:30 pm on 10th December 2013.

Alert me about debates like this

Photo of Baroness Cohen of Pimlico Baroness Cohen of Pimlico Labour 5:30 pm, 10th December 2013

My Lords, I shall speak on Part 1 of the Bill since that is where my experience of the MoD rests. I also speak as what seems to be a highly unpopular advocate of continuing to seek out a GOCO option. My qualifications for speaking on procurement rest on part-time involvement with the MoD in general and with the then newly formed Defence Logistics Organisation, in particular from 1998 to 2005. I was drafted in by the then Secretary of State for Defence, George Robertson, now my noble friend Lord Robertson of Port Ellen, to be one of the group of 12 wise men and only three wise women to critique the emerging conclusions of the strategic defence review. I went straight for the logistics and procurement end, using my experience of advising Unipart for many years, and having worked with Alan Rudge at BT and Richard Lapthorne of BAE. When we concluded our review, it was decided to put together the logistics for all three services under one newly formed organisation, the Defence Logistics Organisation, but not to try to put the new organisation together with the major procurement organisation on the grounds that it was a bridge too far. At all events, I ended up the following year as the only non-executive director of the Defence Logistics Organisation under General Sir Sam Cowan. I stayed in the same role at the request of his successor, Air Chief Marshal

Sir Malcolm Pledger, and refused to stay with his successor only because I felt, after six years, that I had shot my bolt.

I read the White Paper, Better Defence Acquisition, of June 2013—which, after all, is terribly recent—with real pleasure. The writing is clear and elegant, and it makes an absolutely uncompromising analysis of the root causes of underperformance in defence acquisition. I know that it had the admirable report by Bernard Gray in 2009, and the equally admirable report published in June 2011 from the committee chaired by the noble Lord, Lord Levene, to draw on. Those reports brought back painful memories of what I and my fellow non-executive directors had failed to achieve.

The first root cause of failure identified was a not quite steady and overly ambitious equipment programme. Back in 1999, I encountered a forward programme which contained, at the end of it all, all sorts of projects and kits labelled “at risk”. I asked what “at risk” meant, and found out that they turned out to be projects for which there was no money and would not be any in the foreseeable future. Feeling rather like the customer in the famous dead parrot sketch, I pointed out that a project for which there were no funds was not at risk: it was dead, it was an ex-project. All agreed courteously that I was right, but the “at risk” list stayed on the books and in the planning. Military personnel are, in the main, intelligent and practical men, so I decided that they must know something that I did not. Indeed, as it turned out, they know as they have known since before Waterloo that if you have a favoured project and can keep it on the books, you might get it in the end—usually because a war comes along. Of course, the Treasury pays for war; the defence budget gets us a standing army but it does not, on the whole pay for a war.

Worse, you can go on spending a bit of cash on this project and committing yourself to more so that, in the end, it becomes cheaper to go on than to stop. I need hardly say that the energy and politics devoted to all this took up a lot of valuable time. I know that the MoD and the current Secretary of State, to whom I give great credit, have tried to stamp out unrealistic budgeting, but the White Paper describes the present position as a “balanced, if taut” MoD budget. Experience suggests that “taut” is probably code for there being at least two projects for which there are not enough funds, but which are being held in there on the basis of hope.

The second root cause identified by the White Paper is an unstable interface between the requester and the deliverer. In three paragraphs, it says concisely and very graciously that the MoD is a terrible customer and cannot do anything without wanting extras or wanting to do it differently half way through the contract. Anyone who has done any contracting, even for home improvement, knows that that costs money and causes delay. It is difficult to know how to change that.

The third root cause is that there are insufficient skills and management freedom within DE&S. That is indisputably true. There are many excellent people in the MoD, but the project management stars needed are in the private sector, being paid twice as much as anyone in the MoD and, above all, being given freedom to do their jobs without interference.

I also agree with the White Paper’s conclusions. That is why I am so disappointed that the GOCO proposal has fallen. Indeed, I am prepared to put the White Paper’s conclusions more bluntly. The causes of underperformance are endemic and deeply rooted in MoD culture, which resists outside reform, and has done since Waterloo. The MoD has real strengths. It is manned by many excellent people, who feel that they know best. It has gracefully seen off many an outsider. I am sorry to find myself on the other side from my noble friend Lord Levene and the noble Lord, Lord King, since one of them ran defence procurement and the other was Secretary of State. However, radical reform involving giving cash and authority to a GOCO is the only thing that will work. I urge this Government, and I shall be urging a Labour Government when we have one again—soon I hope—to look again at the analysis in this White Paper.

Since I have already probably blown my chances of being appointed Chief of the Defence Staff, I shall go further and suggest that in continuing our search for a GOCO we may have to go about our contracting in a different way. To paraphrase Lady Bracknell, to lose two out of three of the essential private sector candidates suggests not carelessness, but that contract conditions—drawn up by the MoD—may have been too restrictive, and/or may have allowed for unfeasible and expensive interference by the department, or may have been unrealistic in their cost expectations. Indeed I remember that one of the bidders dropped out on the basis that they could not make a living on the contract. We might need to get an outside expert view on how the contract is drafted.

I am reminded of a story—no doubt apocryphal—about a meeting between Louis XIV, the Sun King, and a rebel peasant in the Fronde uprising. Louis XIV condemned the peasant to death but the man successfully pleaded for a year’s stay of execution on the promise that his life would be spared if by then he had taught the king’s horse to talk. His friends, and probably the horse, inquired of him what had possessed him to make so rash a promise. “Ah,” the peasant said, “In a year’s time, the horse may be dead, or I may be dead, or the king may be dead, or the horse may talk”. This of course is a parable about towing a problem along. That is what we are doing if we attempt to solve these deeply rooted problems within the same structure and with the same people that have perpetuated them. It is not the right use of scarce public resources now; nor is it the best future for the armed services.