3.7 Under the current arrangements, Ascent Flight Training (Management) Limited (Ascent) is paid a fixed cost for introducing the MFTS and for ensuring training components are available. Its incentive to introduce the MFTS to agreed timeframes is that availability fees will be paid once training components are ready for training use. Once courses are running, Ascent's availability fees could reduce if training components are not available as expected. Payments include:
• Training system design fee: This is a monthly fixed payment, which reduces during the contract, for designing the training, managing the business and maintaining course materials. Deductions are made if Ascent does not deliver documentation, such as training strategies and annual training plans, on time.
• Training service availability payment: This is a monthly fixed payment that starts to be paid when training components, such as aircraft and simulators, become available. Service credits accrue where availability does not meet a pre-determined threshold. The Department pays compensation if it is at fault.
3.8 Ascent will receive additional incentives for completing courses and meeting broader departmental aims. Incentive payments cover:
• Course completion incentive fee: This is an amount paid from an annually determined pot of money when a scheduled course completes, regardless of student numbers. If a course is cancelled due to the Department not meeting its responsibilities, such as insufficient students or military instructors, then the nominal course fee is redistributed across those courses that have been run. Where Ascent is responsible for a course not completing, then the incentive fee is reduced.
• Whole-system incentive fee: A proportion of the £22 million pot is paid each year if Ascent meets specific performance indicators aligned with the Department's aims for Phase 2 training. These include providing the agreed number of trained aircrew or students spending the expected time in training.
3.9 With the MFTS almost fully introduced and providing more courses, up to 2018-19 Ascent has received a growing amount of incentive fees. However, these fees still comprise less than 2% of total payments. As at 31 March 2019, £7.4 million (1.4% of £514 million) related to incentives to complete training courses, compared with £1.7 million (1.2% of £143 million) as at 31 March 2015. With advanced jet and rear crew training operating fully in 2018-19, and 74 courses running, Ascent did not receive a whole-system incentive payment. The Department and Ascent expected incentive fees to increase once courses are available.
3.10 In 2015, we recommended that the Department encourage better performance from Ascent by using contract incentives to encourage partnership working and improve the quality, length and cost of training. At the time, the Department had not based whole-system incentives on achievable, albeit challenging, milestones. Ascent considers some of these metrics as very unlikely to be achieved.
3.11 Since 2015, the Department and Ascent have agreed contracts to introduce helicopter and fixed-wing training. These contracts included annual performance indicators, linked to incentive payments around training time and student output, which would take effect once training packages are fully introduced from 2020-21 onwards. In addition, the Department and Ascent have agreed advanced jet performance incentives relating to training time, cost and student output. For example, an incentive payment would be paid where specified advanced jet training courses take less than 55 weeks. The 12 students we identified as completing these courses in 2018-19 took between 81 and 95 weeks.
3.12 The Department and Ascent continue to consider how to amend other incentive arrangements. In 2017-18, they sought consultancy support to help identify options and in June 2019 formalised a broader joint transformation project. This work includes a commercially focused project considering changes to the incentive mechanisms, as well as how data could be collected and used.
3.13 Commercial arrangements do not include specific mechanisms to encourage innovation. However, the Department expects Ascent to use innovation to deliver the contractually agreed services and meet agreed incentives. Since May 2018, delays in the MFTS and pressure on flying training have driven the need to consider further innovation. Both Ascent and the Department have suggested and supported innovative proposals to date. This has included course innovations, which have reduced the number of live flying hours required.