In a Special Report published in CSW on 25 September, we examined 12 major projects: three each from the defence, transport, health, and work & pensions departments. We chose projects of a range of types, and covering the ‘traffic light’ risk spectrum from green to red. The text below covers one of the four departments: click here to read our introduction and methodology.
MoD proportion of GMMP value: 25%
Number of major projects: 36
Defence Core Network Services
MPA 2012 rating: Red
Defence Core Network Services (DCNS) is a vast programme to replace all of the Ministry of Defence’s (MoD’s) communications infrastructure contracts, with the aim of developing a network that is cheaper, better integrated and more flexible. Involving every ICT capability from videoconferencing to battlefield radio, satellites to desktop PCs, this is a project of hair-raising complexity: its leaders must reconfigure and commission each element of the MoD’s comms infrastructure as the five existing contracts expire, whilst ensuring that the new technologies integrate perfectly with both the legacy systems and their replacements.
What’s more, to make DCNS compliant with the government’s IT Strategy, it involves a shift from buying hardware to commissioning services; emphasises smaller, shorter contracts to favour SMEs; and makes use of the emerging Public Services Network (PSN).
Unsurprisingly, there have already been delays, resulting in the programme’s red rating. The MoD had to get Cabinet Office approval for an extension to its existing desktop PCs contract – giving it the breathing space to develop its overall plan – and the resulting tough negotiations with contractor HP created “a significant deviation from the planned schedule”, as the MoD acknowledged in April.
Meanwhile, the DCNS team are trying to work out how best to configure the new set of contracts: they must decide whether to bundle the existing 18 contracts into a few larger contracts – perhaps making them less adaptable as technologies develop – or to keep a large number of contracts and manage the risks of integrating so many systems. Thompson notes that bigger contracts can be hard to let: with 300,000 users on an ICT system that requires global reach and tight security, he says, “our scale is so enormous that it doesn’t easily sit in the marketplace.”
To help resolve these questions, the MoD has brought in a consortium led by IT business Atos, and commissioned an independent review of the options. It’s also protected the DCNS team from the organisational change underway at Defence Equipment & Support (DE&S), which used to manage these contracts, by placing it under the direct control of a new MoD IT chief. “We’ll shortly appoint a director general-level CIO to bring together all of the information services and systems across the MoD,” says Thompson, adding that the arrival of a “heavy-hitter” will give the team the authority to resist the inevitable calls for endless bespoke solutions – a problem that’s traditionally bedevilled MoD procurement.
The MoD plans to go to market either late this year or early next, so it’s on a fairly tight deadline to decide the right contracts structure. And Thompson is realistic about the chances of DCNS becoming a low-risk project anytime soon: “There’s a high prospect that it’ll continue to be amber for some years,” he says. “We spend more than £1bn a year in the tech space, and it’ll take a while to work out how we do this.”
Defence Infrastructure Organisation
MPA 2012 rating: Amber
Asked why the Defence Infrastructure Organisation (DIO) project is classified as amber, Thompson replies that these judgements – made in late 2012 – are “a bit old, and get out of date quite quickly. This project is in the last stages of procurement, and it’s widely regarded as a successful change programme.” John Louth, director for defence, industries and society at the Royal United Services Institute (RUSI), is supportive: “People were concerned at DIO’s original requirements, simply because it was perceived as being remarkably ambitious,” he says. But, he adds, “most fair-minded people would say they’ve been pleasantly surprised at the early benefits that DIO has generated.”
The MPA reviewers’ caution is understandable, however: DIO was only established in 2011, creating a single home for all the MoD’s and armed forces’ properties, and this young organisation is handling the most advanced of the MoD’s current crop of change programmes. Tasked with cutting the workforce in half, founding chief executive Andrew Manley has introduced the ‘Enhanced Operating Model’ (EOM) – a set of major reforms designed to integrate and streamline the business – and bought a new IBM facilities management IT system.
Manley is now working on still bigger changes. The current procurement involves DIO testing the proposals put forward by three consortia for two different options: an ‘incorporated model’, in which a private ‘Strategic Business Partner’ (SBP) manages DIO as a new, government-owned company; and an ‘unincorporated model’, under which a private management team runs DIO as an MoD body. There’s a third option too – retaining public managers to continue the EOM reforms – and Thompson insists that he’s “still open to all three”.
Some commentators have raised concerns about potential conflicts of interest – particularly given that the three consortia share some members with those bidding to run DE&S – but Thompson says he’s “been clear that [businesses] have to decide whether they’ll be in the SBP, or delivering services in our supply chain”. And he rejects the idea that a business involved in running both DIO and DE&S might suffer from conflicts of interest: “The amount of transparency between the department and a government-owned company would ensure we have a strong oversight function and sufficient visibility”, he says.
According to the MoD’s section of the MPA annual report, the need to get Cabinet Office approvals has slowed things down: it took longer than expected to get the all-clear both for DIO’s new IT system, and for the SBP procurement options. It’s also fair to say that the MoD is figuring out how to do this on the job: “One of the things we’re learning is that you have to have a [procurement] process that is slightly iterative”, the MoD chief adds. “You start in one place, and if you see additional value for the taxpayer then you may move.”
As a result, the scheme is running some months late, with a decision on the procurement expected by the end of the year. But Thompson is confident: “You’re talking about an organisation that spends over £3bn a year in several thousand locations, so it’s complicated. There’s 7.5 feet of paper to go through,” he says. But with three consortia bidding and an assessment process underway, “it’s in a really good place.”
Type 45 Destroyers
MPA 2012 rating: Green
In 2000, the government ordered HMS Daring, the first of its new generation of destroyers, with the expectation that it would be in service by 2007: the plan was for a 12-strong fleet, with the first half-dozen priced at £5bn. In the event, HMS Daring joined the fleet in November 2010, and the project was eventually capped at six ships costing £6.5bn. Whilst the T45s’ air defence capabilities are amongst the very best in the world, the project was so badly delayed that Daring joined the fleet before it had been fitted with its primary weapon; even today, the T45s still lack the ‘Cooperative Engagement Capability’ required to make full use of their radar and missile systems.
In the mid-2000s, the T45 “was perceived as a problem child,” says RUSI’s Louth: it suffered from continuing delays and cost increases caused, according to a 2009 NAO report, by “over-optimism on project delivery, inappropriate commercial arrangements, and poor project management at the outset”. Thompson acknowledges that at that time, “the MoD was not taking responsibility for the costs and specifications for equipment programmes, and the timescales in which they could be procured and built.”
Nowadays, though, Louth says the T45 is “a very good case study of how a programme that was flashing amber or red can be put back on green.” Better project management and a 2007 contract renegotiation reconciled expectations with reality, and in 2008 naval leaders accepted that only six ships would be purchased. The NAO, through major project reviews that gave a consistent view of the project over time, has played a “critical” role in getting the project back on track, Louth believes.
Asked to pull out lessons for the MoD’s next big surface ship project, the Type 26 frigate, Thompson says: “We need to think very carefully about how you fix the design and specification before you get too far into manufacture; and we also need to think about the export market” (the T45’s £1bn price has deterred overseas buyers). However, asked whether it was wise to buy ships at the very cutting edge of technology, Thompson argues that sometimes the MoD “can’t avoid literally developing the science as we go along. If we withdrew from the forefront of technology, our people wouldn’t have that military edge.”
When projects operate “right at the edge of capability,” he says, “some will go wrong.” The solution is to identify problems “as early as we can, and try to correct it. I think we now have the systems and the governance to spot when a project is going wrong, and to intervene.” The MoD has turned its problem child into a powerful fighting force: the T45 programme has, says Thompson, left our navy with a truly “awesome ship”.