I have asked for this debate because there is still a good deal of confusion about exactly what is happening at MOD Llangennech, and staff at Llangennech have a number of concerns.
First, we need to understand that there are several different sections at Llangennech: forms and publications, commodity management; forms and publications, storage and distribution; civilian records; the print facility; and timber and metals.
We then need to understand what has happened so far. In the process of the future defence supply chain initiative, two private consortia—BAE Systems and DML—bid for the parts of the defence supply chain and lost against a bid from the Defence Storage and Distribution Agency, or DSDA. DSDA therefore retained the work, but, as part of the bid, it planned on outsourcing "non-core" activity. Most of Llangennech's work is non-core as, in the main, the centre stores, distributes and commodity-manages paper. The forms and publications section employs the largest number of staff—it employs the majority of the staff at Llangennech.
As part of the FDSCI process, bids were originally put in for this work by consortia such as BAE and partners. It was won by an in-house bid that proposed closing the Llangennech site and transferring the work to other Ministry of Defence sites. As part of the bid, DSDA also planned on outsourcing non-core activity.
The MOD has enabling contracts with the private sector—with Astron to carry out print tasks, and with TNT for records storage. The print contract is being re-let and has been extended to include forms and publications storage, including the commodity management thereof. Astron has in the past done single tasks for the MOD. It now appears that, by means of an extended contract, it is being given the opportunity to take over the work of the print unit. That is happening without any formal bidding procedure. Furthermore, Astron is also now being given the opportunity to take over the forms and publications section. Again, that is being done by means of an extended contract.
The Minister has stated that
"our consideration will examine the cost-effectiveness of retaining the work at Llangennech".
If the work is now being given to the private company Astron—rather than just being kept in-house—the work force at Llangennech would like to know if they could also put in a bid to do the work. To create a level playing field, it is not sufficient that the charges Astron is proposing for the work should be compared with the existing costs at Llangennech. The work force should have the opportunity to look into potential savings and then put together a professional, competitive bid.
In the original bidding process, the bidders—BAE and DML—headed up consortia which included distribution companies. Realistically, they had to be consortia in order to provide the full coverage of the service. Astron is being given the work as a single company. It subcontracts its work. However, it is unclear whether Astron is either able or entitled to undertake the distribution of the MOD's printed matter. The MOD's in-house distribution network covers all parts of the globe. Moreover, the distribution element was included in the bidding process under the FDSCI. Therefore, I should be grateful if the Minister could clarify whether the cost to the MOD of the work carried out by Astron includes distribution to all theatres—the Falklands, Afghanistan, and the middle east. As the Minister will be aware, initial plans by Westland to undertake distribution were hastily abandoned when it realised the scale, the complexity, the cost and the legal difficulties of distributing to destinations such as foreign embassies. Given that for legal reasons—customs law—Westland was unable to distribute outside the UK, I should be grateful if the Minister would clarify whether Astron is in a position to undertake distribution.
A further issue arises: by handing the work over to one firm with no competitive bidding procedure, is the MOD really getting value for money? What happens if one of the unsuccessful bidders, such as BAE, complains that the work is now being given to a private company that did not bid for it in the first place? Although both DML and BAE lost out on the FDSCI, both Astron and TNT—but especially Astron—stand to benefit from its outcome without having to bid directly. It is difficult to see how DSDA can win an in-house bid on the one hand, thereby demonstrating value for money, and yet not represent the value for money option in terms of forms and publications storage, commodity management, print and the storage of civilian records. How can DSDA store other material more cheaply than the private sector and yet not the material stored at Llangennech?
The process may well be perfectly legal, but it still does not seem to be very transparent. Effectively, DSDA, with an in-house bid, is giving work to a private company without any bidding process. What the staff at Llangennech are saying is this: "As the work is now going out to private tender, we would like the opportunity to bid for it; we would like to know exactly what the specification is, and we would like to use our expertise to put in a bid that will offer value for money to the MOD." Staff at Llangennech are more than willing to look into ways to effect cost savings and to put together a competitive bid. The staff at Llangennech have already been directly involved in making their work more efficient. They have been piloting the use of IT, which, with proper support services provided by skilled personnel, could lead to further savings for the MOD. This is going out to the private sector. It is not therefore contributing to the consolidation of services at Bicester or Donnington, which was one reason given for the move to close Llangennech.
On the print unit, past experience does not suggest that a private company would be any cheaper than an in-house bid from Llangennech. For example, I understand that Astron charged £800,000 for an initial distribution—an initial distribution without the differentiated follow-up of items, equalling less than 1 per cent. of the total inventory. It may be that, in an initial contract with a private provider, the MOD does not want the full capacity of the current print unit at Llangennech, which has recently enlarged to cope with the extra work from Keynsham, notably the production of defence instruction notices.
The MOD may only want a specified volume of work as a core contract, with the option to buy in extra. The print unit in Llangennech needs to know that if it is to work out a comparable business plan; it needs to know what the core volume of work is and have some indication as to the likelihood of additional work. It has a service that could be marketed commercially to make up for any shortfall in the work coming from the MOD, but it needs time to draw up a business plan and do the necessary marketing, if it is to retain its current capacity through bringing in work from sources other than a potential MOD contract. Currently staffing levels at the print unit have been inflated by the appointment last August of five extra temporary staff to cover the work brought over from Keynsham. Just calculating the current cost of the print unit with the price that a private company produces to a specification is not comparing like with like.
To ensure that the MOD, and ultimately the taxpayer, is getting the best value for money, if the intention is to outsource the print unit work, then it would be foolish not to look at an in-house bid from Llangennech, as that bid could provide the best value for money. Otherwise, the MOD would be missing a bargain, and the taxpayer would be paying the price.
Nine staff work in civilian records. It appears that DSDA intends to put that work out to contract to TNT, despite the fact that it was out of the scope of the FDSCI. There is a precedent in outsourcing here, as TNT has had a contract for outsourcing military records. Staff at Llangennech need to know if civilian records are being outsourced, and they need to know what the specification is—whether the same level of service is required as the current levels provide, or whether the MOD is looking for a slimmed down service with less access to records. What is unacceptable to staff at Llangennech, and should be unacceptable to the taxpayer, is to find that the work has just been given to a private company with no transparency about what that company bid for, and no opportunity for any other company or the staff themselves to bid.
As we understand it, the classified section would not be a candidate for privatisation, for reasons of national security. I would be grateful if the Minister could confirm that.
The timbers and metals section takes up a large proportion of the ground space at Llangennech; it is what many people think of when they think of Llangennech. However, the actual number of employees in the section—16—is a small proportion of the total work force. There seem to be some very confused messages about what exactly is happening to this section. There seems to be a lot of coming and going. It has just been announced that all air metals from Stafford are to be moved to Llangennech. However, if Llangennech is to close, how long will they be staying there? Is that the best use of taxpayers' money? Propellers left Llangennech the other day and went to Bicester, but when they arrived at Bicester there was no room so they had to go to Donnington.
There is a unique lifting capacity at Llangennech: what might be called a very large crane. I understand that the plan is to move it to a shed at Bicester. It will fit into the shed, but only as long as it does not try to lift anything. Quite how useful that will be, I do not know. The former chief executive of DSDA had high hopes for the 20-ton crane at ABRO, Donnington. However, it was announced today that ABRO is to continue for another four years, so it will need to keep its crane for its work. That means that the only heavy-lift facility defence storage has left is at Llangennech, where there is a 40-ton crane and a 20-ton crane. Staff would like to be reassured that a thorough assessment has been made of the capacity at the various sites and that there is a clear, comprehensive plan for all the storage needed. We do not want to see propellers whizzing around the country only to find, like some surreal but expensive game of musical chairs, that there is no space left for a propeller at the end.
I understand that consideration has been given to opening up the mothballed site B at Bicester. Opening up a site that has not been used for some time will obviously be costly with regard to health and safety, in ensuring that all appliances are working properly and in terms of maintenance, such as minor repairs. The issue is whether that provides the best value for money when we have a working site in Llangennech.
I would like to thank the Minister for his assurances about support for staff and their families in the event of closure at Llangennech. There may be some staff whose age and personal circumstances mean that they would be very interested in finishing and taking severance pay. However, for many the severance pay, although it might initially look tempting, would be no substitute for a regular income. What would be really galling would be to see the Ministry of Defence paying large sums of money to the private sector for the work currently done at Llangennech, when the staff know that they could have provided the same service or a better service more cheaply.
The staff would have a strong vested interest in ensuring that the work is done superbly well in order to keep the contracts for the future because they would have written the bids themselves, and because their private companies would have been formed specifically to do MOD work. A private company for which an MOD contract was just one small section of its operation might have much less motivation in ensuring that the job was done well. It might end up subcontracting the work with little quality control, with possible embarrassing consequences for the MOD.
If the MOD decides to reduce the Llangennech site to a trailer drop point and get rid of the land, serious consideration should be given to what price the land would fetch. Would it not be better for the MOD to sell off land in parts of southern England where it would fetch a much better price and help to alleviate the shortage of brownfield sites available for much-needed housing? Perhaps the MOD would prefer to rent out the space at Llangennech, but the income generated would be limited. There is already a large amount of warehousing space only a few hundred yards away from Llangennech that has been lying empty for ages. If the MOD is to provide the taxpayer with value for money, it makes better sense to rent out facilities for income generation in southern England where the returns are much greater.
In an ideal world, we would not need to go through the upheaval of change and there are many who would prefer not to be talking about privatising our defence supply chain. However, given that change is necessary and that the chosen way forward involves outsourcing, to ensure that we get value for money for the MOD and the taxpayer, the existing work force should be given every opportunity to compete on a level playing field for the work. That is the only way that we can ensure fair play for all concerned: the work force, the MOD and the taxpayer.
I congratulate my hon. Friend Nia Griffith on securing this important debate and I thank her for giving up a couple of minutes to allow me to support the powerful case she made.
A number of my constituents are also employed at MOD Llangennech. When Llangennech representatives invited me to visit the site, I walked round it and met the people on the ground, and I was enormously impressed by the dedication of staff and what they told me. The people there said exactly what my hon. Friend said in the last few minutes: the proposal to transfer the various sections of work out of Llangennech is wrong, because we will end up with work being done less efficiently, less effectively and probably at far greater cost.
The people at Llangennech and the units of the armed forces that they serve—their customers, if you like—have not been involved in or even properly consulted about the proposal. That is just plain wrong. We should remember that Llangennech has an excellent performance record throughout its sections. It has led the way in employment of information technology, as my hon. Friend the Member for Llanelli mentioned. It has a wealth of staff expertise that the MOD really should not be prepared to lose. It has always been extremely economical to run and in 2003 it was the only site to meet its financial targets for three consecutive years. My hon. Friend is right: there is a compelling case in economic and organisational terms to allow the staff to bid for the work that they already do so well. There is also a case on the basis of natural justice.
I congratulate my hon. Friend Nia Griffith on securing the debate. I know that she and my hon. Friend Mr. Caton have championed the interests of the work force of Llangennech quite vigorously and this is a further expression of their support for and solidarity with the work force there.
It may be helpful if I start by setting out the background to the decision to close the defence storage and distribution centre at Llangennech. It is critical that our armed forces receive the support they need to do the jobs we ask of them. Our servicemen are among the best equipped and supported in the world and the measures and programmes that the Government have put in place will ensure that they remain so in the future. One such measure is the future defence supply chain initiative, which was launched in 2002 with the aim of assessing a range of options for managing and operating the defence supply chain to reduce costs of ownership, while maintaining or improving service levels and enhancing operational capability.
Alternative models of in-house provision were compared with a potential partnered solution for which proposals were sought from industry. In July 2005, the Secretary of State for Defence announced that one of the in-house options, known as "do different", had been selected. That option was chosen as it offered the best balance between delivering improved logistic support to operations and achieving better value for money for taxpayers. The solution, together with the improvements that are being introduced across the supply chain, including monitoring and tracking the movements of military supplies, will result in the United Kingdom having a world-class military supply chain, dedicated to ensuring that the support provided to soldiers, sailors and aircrew operating on the front line is second to none, which must be our prime objective.
Examples of improvements include: the ability to increase outputs rapidly in support of operations; providing a single, accountable point of contact for MOD storage and distribution customers; and delivering changes to process that will increase confidence at the front line that requirements will be met on time and in full. Overall, implementation of the initiative is expected to make savings of over £50 million per year by 2010 and more than £441 million over the next 10 years. As my hon. Friends will recognise, those are precious resources that we need to free up for use elsewhere.
Under the "do different" proposal, three storage and distribution centres are expected to close: Stafford by 2007, Llangennech by mid-2008 and Longtown by mid-2009. There will be further streamlining at other establishments. In addition, the defence regional distribution centres, including the one at Llangennech, will convert to trailer drop points by 2009–10. That means that when goods arrive at the distribution centres, they will no longer be unloaded and placed in a warehouse. Instead the trailer body will be removed and swapped to another trailer before being transported to its final destination, which will minimise double handling in the majority of cases, improve transit times and result in a more effective use of MOD's estate and vehicles.
The closure at Llangennech alone will bring savings of more than £5 million per annum, and closure will affect all of the activities carried out at Llangennech. I can confirm that a project team has been assembled to look into the print, storage and distribution of forms, civilian personnel records, metal stockholding and wood, bar and tube cutting activities. The project team will look at outsourcing the functions, or moving the business to an alternative DSDA site or another MOD department. It is not true, as I believe has been rumoured, that decisions have already been taken to outsource those services. The review process is at a comparatively early stage. Indeed, detailed planning and reporting dates have yet to be agreed. I can assure my hon. Friends that the trade unions are being given every opportunity to participate in that work. My hon. Friend the Member for Llanelli has made a number of proposals for involving the trade unions in more detail, and possibly involving them in the future operation of the site. Those proposals, if put to us, will be considered. We are considering all issues.
The value for money issue is crucial to us, and there will be full consultation with the trade unions. My right hon. Friend the Minister of State for the Armed Forces will keep all interested parties informed. Should my hon. Friend the Member for Llanelli seek a meeting to develop any of her arguments with him directly, I have no doubt that having read the Hansard record of today's proceedings, he would agree to meet her.
Turning back to the implications of the future defence supply chain initiative, I fully understand the consequences of those changes for the future employment of MOD staff. The decision to move to the implementation of that important initiative is in no way a reflection of the contribution that the work force in the supply chain have made. I know that there is some uncertainty among them, but I also acknowledge the loyal and dedicated service our people have given to the Ministry of Defence over the years.
In overall terms, the new supply chain organisation will require around 2,000 fewer posts, the majority of which are occupied by civilians. We estimate that about half those reductions will be achieved through natural wastage and the majority of the remainder will come through voluntary early release. Some compulsory redundancies will be necessary, but the intention is to keep them to a minimum.
There may be some opportunities for staff to transfer to other MOD sites or other Departments. A staff preference exercise will be undertaken and the MOD will liaise with Jobcentre Plus in the lead up to the closure. Team Wales has done fantastic work in circumstances like those that we face at Llangennech. The trades unions were kept fully informed and consulted throughout the planning phase of the future defence supply chain initiative, and they continue to be involved during its implementation. We would want that.
Looking more specifically at Llangennech, as the rundown progresses there will be a gradual transfer of inventory and stock within existing sites, with a corresponding gradual reduction in staff numbers. It is anticipated that natural wastage will account for some reductions, and there may be opportunities for relocation to other MOD sites. However, some redundancies will be unavoidable. At present the number is estimated to be 120 from both the defence storage and distribution centre and the defence regional distribution centre.
The MOD outplacement service will be available to support staff and spouses affected by the reductions at the site, offering support with relocation, financial advice and preparation for alternative employment. Training will be available to assist staff with transition to life in the private sector, and the services of the MOD welfare organisation will be available also to help staff with their personal circumstances. Redundancy payments and pension entitlements will be in accordance with the civil service compensation scheme and the principal civil service pension schemes.
It has been decided that the transformation can be achieved by the DSDA remaining an Executive agency, but with a revised framework document. That document will give the appropriate freedoms and delegations to the agency's management team, allowing it to complete the transformation plan. In the third year, "do different" will be reviewed, as the plan is to have completed the bulk of the transformation by that point.
Changes will include reinforcing the senior management team. In addition the DSDA work force will receive significant amounts of training with the subsequent multi-skilling, providing greater flexibility and effectiveness. With improvements in processing, such as selecting for destination from the warehouse, much less double handling and, hence, fewer process costs will be incurred.
I want to pay tribute to the contribution that the staff at Llangennech have made and continue to make to the work of their agency and to defence. These are very difficult, trying and uncertain times for them, and I fully recognise the very powerful case argued by my hon. Friends the Members for Llanelli and for Gower in defence of the work force. My hon. Friends are doing what is perfectly proper, and they championed their constituents in an exemplary way. However, I must emphasise once more that the changes taking place at Llangennech are in no way a commentary on the expertise or effectiveness of the staff. They have been fantastic. I should like to underline the fact that we are doing all we can to support them at this time when their future is uncertain.
It is always a difficult decision to implement staff reductions and site closures. But we must do what is right for defence as a whole, and we remain convinced that the implementation of future defence supply chain initiatives, and the benefits that they will bring, are firmly in the national interest. Having said that, I shall certainly read the Hansard record of today's proceedings and take into account the comments of my hon. Friends. I have no doubt that if they were to seek a meeting with our right hon. Friend the Minister of State for the Armed Forces, he would meet them to explore the issues that they have raised and, perhaps, give them further reassurance that, as we take the agenda forward, we are trying to involve everybody—the trade unions in particular—in discussions.
It is not an easy time for us, and it is certainly not an easy time for the people involved. I fully appreciate that. However, I want my hon. Friends to know that we shall do everything possible to make this difficult decision effective in the interests of defence, while being sensitive to its consequences for the people whom my hon. Friends have represented so well this afternoon.