7.1 Lord Levene’s Defence Reform Unit reported ahead of schedule in June 2011, as set out in last year’s Annual Report. We accepted all its recommendations. Progress since then has been strong, with a number of major elements having already been implemented. Completion of the organisational changes is planned for April 2013, recognising that this is an ambitious and stretching target.
7.2 Following further design and implementation work, we published a first full version of a ‘Blueprint for the future Department’, in December 2011, reissued in June 2012 to reflect subsequent progress.
The Blueprint is consistent with, and builds on, the emerging operating model circulated to all staff in September, feedback on that version, and further design and implementation work by the Defence Reform Unit. It describes what the Department will look like and how Defence will work from April 2013, and the key milestones as we make the transition.
The new model:
● increases real accountability of budget holders for delivering Defence outputs within the agreed financial envelope, while empowering the single Service Chiefs of Staff with greater freedoms to run their Service;
● creates a stronger, smaller and more strategic centre, better able to take difficult resource allocation decisions and monitor the delivery of outputs;
● provides a structured framework that sets out clearly which decisions are best taken in the centre and which are best taken in the business, but in all cases makes senior individuals responsible for them, gives them the means and incentives to deliver, and holds them robustly to account;
● establishes much tighter financial management processes to ensure that the need for affordability is recognised and owned at all levels across the Department and that the Board has the increased visibility and assurance necessary to ensure financial control, but ends micro-management;
● balances the strengths of the single Services with the need to build on the joint approach, and disentangles Head Office and joint activity through establishment of a separate Joint Forces Command; and
● brings transparency, standardisation and best practice to enabling processes, both to ensure efficiency and to ensure that posts are filled with the right individuals, with the right skills, for the right length of time.
7.3 The Defence Board issued a new Defence Vision in May 2012 alongside the Planning Round 2012 announcement, and we are now taking forward a major internal communications campaign to support Transforming Defence, including
the organisational and behavioural changes encompassed by the Defence Reform Review.
7.4 Lord Levene recommended that, alongside the increased freedoms and accountabilities for Front Line Commands and TLBs, Head Office should be smaller and more strategic, with improved financial controls and behaviours.
The Permanent Secretary will be engaging TLB holders in regular reviews of performance during 2012-13 in preparation for rolling out the full process for holding them to account against their business objectives from April 2013. We published proposals for the future Head Office Senior Structure in December 2011, and announced our final conclusions following consultations in June 2012. It will remain an integrated civilian-military organisation supporting Ministers, the Chief of the Defence Staff and the Permanent Secretary in advising Government and accountability to Parliament; making policy and setting Defence strategy; planning and resource allocation;
managing Defence; and directing military
operations at the strategic level. It will also include the new Defence Safety and Environment Authority, extending implementation of one of the key principles of the Haddon-Cave report to areas outside aviation. But with the transfer of some responsibilities from Head Office to the Front Line Commands, Joint Forces Command and other TLBs, it will be substantially smaller and more strategic than before. By 2013-14 it will have about 1,900 military and civil service personnel and a single building in central London (by comparison, the MOD occupied more than 20 London buildings and had over 50,000 personnel in and around London in the early 1990s). There will also be a significant reduction of up to 25% in the senior star count by April 2014 (up to 21% by Apr 2013), including the abolition of the post of 2nd Permanent Secretary. The new Joint Assured Model for managing senior officers recommended by Lord Levene was introduced in April 2012, overseen by the Defence Board’s new People Subcommittee.
7.5 Outside the Head Office the new Joint Forces Command achieved initial operating capability on time on 2 April 2012. The Navy, Army and Air Force have also all introduced new command structures and the Army has introduced its’ simplified regional structure. We have made significant progress in establishing new partnership arrangements to draw on private sector expertise in acquisition and corporate support functions. We set up the new Defence Infrastructure Organisation (DIO) in April 2011. During the year we successfully conducted soft market testing on potential strategic business models, following which in May 2012 we launched a procurement exercise to test whether bringing a Strategic Business Partner into DIO offers the best value for money solution for Defence. In July 2011 we set up the new Defence Business Services organisation, and in March 2012 announced that it will be working with an external management team from Serco to transform it into a lean and effective shared services centre, building on private sector best practice. Under the Chief of Defence Materiel we have been developing the Materiel Strategy, looking at future options for Defence Equipment and Support that increase the role of the private sector, including a Trading Fund Agency, Executive Non-Departmental Public body or Government Owned Contractor Operated (GOCO) organisation.
We have carried out a soft market testing exercise, and Ministers will review the options in light of this further work and make a decision on which to take forward later this year. We have proposed for consultation significant changes to security and civil policing arrangements to ensure they reflect the main crime and security risks we face while delivering policing and guarding requirements as cost-effectively as possible. We have continued to make progress reducing our headcount against the SDSR baseline, with military trained strength reducing by about 7,800 (4.4%), and the civilian workforce by 14,700 (17.7%) since April 2010.
7.6 As Lord Levene’s report stressed, improving our business leadership and behaviours are critical to delivering a sustainably transformed MOD.
Changing behaviour and culture is difficult, and we have always struggled with this. So in parallel with all the work on organisation restructuring, process and reductions, we have introduced a new behavioural framework for the business side of Defence under which we are working to develop a long term behaviours and business improvement programme. This sets out the three behaviours we need to focus on: effective business leadership at every level of defence; working together to make defence as a whole stronger; and modern,
innovative ways of doing business where we weed out indecision, red tape and waste. Key blocks of work are in hand on improving leadership, effective holding to account, better business processes, and a revitalised approach to innovation and continuous improvement. We have also introduced stronger feedback and engagement arrangements across defence.
7.7 There have also been developments in the way we conduct several parts of our business, internal and external. Externally, following publication of the National Security Through Technology White Paper we have launched a new industrial engagement policy with overseas-based suppliers, with the aim of encouraging them to invest in the defence and security sectors. The Defence Infrastructure Organisation is taking forward its Next Generation Estates Contract programme, having shortlisted bidders for delivery of future large-scale construction projects, and invited industry to submit expressions of interest in three new regional prime contracts for the future provision of facilities management in England and Wales. Internally, despite the pressures we face, we have encouragingly improved our Freedom of Information system enough to persuade the Information Commissioner that we are meeting the legal standard and no longer need extra formal monitoring. We have launched the Defence Security Handbook, which greatly simplifies the way we help people understand and follow our security rules.
And in response to staff feedback we have simplified civilian Performance Appraisal and Recruitment Processes.
Secretary of State Phil Hammond opens Joint Forces Command (JFC) at Northwood HQ on 2 April 2012 with Air Chief Marshal Sir Stuart Peach
A Lynx Mk 9A helicopter flying over the desert in Helmand province, Afghanistan.