In the equipment support area there has been significant progress in moving towards CfA where the Department considers it appropriate for equipment that is already in-service (i.e., changes to the traditional methods of support), but progress towards PFI/CfC is limited to a few cases where new capability is to be introduced (e.g., FSTA - air to air refuelling). These measures appear to have delivered significant savings (£1bn p.a.84), albeit not sufficient to offset overall cost growth within the ESP. Further progress up the Transformation Staircase from Spares and Maintenance towards CfA / CfC support arrangements will be limited by a number of factors:
• MoD Acquisition system
- in-year financial pressures, resulting from the overheated EPP and ESP, significantly curtail "discretionary" spending - including relatively small investments with payback periods of greater than one year, but which would still be beneficial on an NPV / value for money basis; and
- visibility over through-life support costs for new equipment varies according to the size of the technology increment (e.g., Typhoon vs. support vehicles). Therefore the appropriate balance of risk between MoD and contractors is unclear at contract point for procurement of the capital equipment making value for money difficult / impossible to demonstrate definitively at Main Gate.
• MoD Commercial skills
- limited availability of commercial skills to support large contract negotiation in the support area (see also Chapter 8); and
- support solutions can be de-risked through a series of incremental additions to ensure flexibility around costs and capability.
• MoD Information and understanding gaps
- MoD frequently has no clear understanding of the link between support costs (i.e., inputs) and the military outputs (e.g., flying hours achieved);
- limited availability of the type of robust data that would be required to develop long-term cost models within the availability contracts and the analysis of the available data are inadequate; and
- loss of MoD visibility over spares holding / inventory / logistics arrangements where they are provided by industry (although the capability risk continues to reside with the MoD).
• MoD resources: MoD needs to provide resources to support contract. Inability to deliver these resources results in CfA contractors being able to avoid obligations (cf., Tornado ATTAC contract where the RAF will only be able to provide 84% of the manpower requirement until
May 09).
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84 MoD Annual Report and Accounts 2007-08