24 We make the following recommendations:
a The Department is in the difficult position of needing to cut its headcount quickly, to maximise financial savings. While it has taken some steps to retain some specific skills, it risks not having all skills that may be needed in the future. The full detail of the operating model will not be available until after the redundancy programme is well under way.
The Department should press on with developing and implementing the detailed operating model as a matter of priority and ensure that it aligns headcount reductions with the model as it develops.
b To ensure that Defence can deliver its strategic objectives with fewer personnel, the Department will need to transform how it works. We have not seen enough detail to determine whether the Department is making sufficiently substantial changes to the ways in which it works.
Greater emphasis is required on transforming ways of working to make sure strategic objectives can still be delivered with a reduced workforce.
c The Department currently has skills gaps in both its military and civilian workforce and estimates at least one-third of headcount reductions required will be made through natural wastage - a process over which it has less control.
The Department needs to maintain its vigilance over the emergence of new and worsening skills gaps in the medium to long term in its civilian and military workforce.
d The Department does not have good information on the skills of its civilian workforce.
It needs to step up its efforts to develop a comprehensive understanding of skills across its civilian workforce.
e Our experience shows that cost reduction programmes often deliver less than anticipated. While the Department has represented to us that it has set aside some financial contingency, it has not identified further potential savings measures in the event that current plans do not meet targets.
We raised the recommendation with the Department that it should develop a costed plan identifying how further savings would be made if they are needed. The Department believes it has the capacity to deal with any underachievement of its current plans through compensating adjustments in its budgeting process and that a costed plan is, therefore, unnecessary. Should this prove not to be the case we encourage the Department to revisit this recommendation in the future.