'Each man takes the limits of his own field of vision for the limits of the world'
-- Arthur Schopenhauer, Essays and Aphorisms

'Artists are tricky fellows sir, forever shaping the world according to some design of their own'
-- Jonathan Strange, Jonathan Strange & Mr Norrell

Sunday, 31 July 2011

The Wisdom of Crowds. Review of "Defence Reform: An independent report into the structure and managment of the Ministry of Defence"

"Reconcile ambition with reality."

In August 2010, Lord Levene was employed by Liam Fox, as Defence Secretary, to commission a report as chair of the Defence Reform Steering Group.The deadline was July 2011. The report was published on June 27, 2011. Operating in tandem with the "quinquennial" SDSR, ("the Defence Secretary’s view was that the SDSR alone would not be enough to resolve the problems facing Defence. His assessment was that the existing departmental management structure was demonstrably not working well, and had contributed to the Department’s financial crisis") the report seeks to streamline the corpulent entity that is the MOD, bloated by middle managers and massive overexpenditure. Put simply, when it's the taxpayers' money you're spending and not you're own, the emphasis on efficiency isn't a priority.

This report examines the operating structure as a whole, a project which arguably hasn't been undertaken since The Central Organisation for Defence White Paper of 1984, and the New Management Strategy. Which is quite staggering in its ineptitude and myopia since the end of the Cold War and the reorientation of strategic necessities in the early 1990s.

There's little new here in the Levene report (which is probably why it took less than the time he was given to complete it, and I can almost envisage the accompanying PowerPoint presentation), but it does serve to lessen public anger, as details consistently emerge of massive waste and incompetence within the MOD. Streamlining the MOD whilst coagulating the three branches under a Joint Services command is logical. Continued successful integration of civilian and military personnel within the ministry is a further goal. The NHS has a similar problem with those engaged at the chalk face (to take a teacher's term) and the administrators.

The composition of the review board is interesting and merits examination simply for their lack of knowledge of the MOD or any other ministries of defence, for their lack of knowledge of UK military strategies or current and future threats and how this might impact organizational structure. None of the personnel have, as far as i can see, experience in the military-industrial complex. The privatisation of warfighting is a pressing issue that we need to understand and how this effects the MOD structure. 
The personnel are:
Lord Levene: Career in business and banking with roles in defence procurement under Michael Heseltine.
Baroness Noakes: A chartered accountant by training who has worked in financial streamlining of the NHS in the late 1980s and early 1990s. That didn't work well then.
Dr David Allen: His doctorate is in chemistry and had a successful career at BP
Raymond McKeeve: Corporate finance partner at Berwin Leighton Paisner, involved in restructuring and acquisitions.
Björn Conway: Head of Aerospace, Defence, Security and Resilience at...Ernst and Young.
George Iacobescu: Known as the "bankers' landlord" he is the chariman of the Canary Wharf Group.
Gerry Grimstone: A privatisation "guru" to UK governments
General Sir Nick Houghton: Vice-chief of the Defence Staff
Ursula Brennan: Replaced by Jon Day after being made 2nd PUS (Permanent Under Secretary) in February 2011
My observations of the report are these, but below them are the recent media reports of Dempsey's confirmation hearing in the US, which I feel are much more important.
  • The shadow of the tottering global economy hangs over the report.
  • The report recommends manking, "the Head Office smaller and more strategic, to make high level balance of investment decisions, set strategic direction and a strong corporate framework, and hold to account." This is in keeping with a desire to streamline, but also to realign the MOD, set it to a coherent direction. We want everyone at the MOD to be singing from the same hymn sheet, and for everyone to know the words to the hymn.The creation of a Defence Board is suggested, based around the Defence Secretary. The Board would comprise: Defence Secretary (Chair);
    • An additional Minister;
    • Permanent Secretary;
    • Chief of the Defence Staff;
    • Director General Finance - reflecting his role as the principal financial adviser;
    • Chief of Defence Materiel - reflecting his responsibility for a major part of the
    Department’s business, and the immediate priority of ensuring that the equipment
    and support programme is affordable and deliverable; and,
    • Three Non-Executive Directors (NED), one of whom would act as the lead NED (as
    defined in Cabinet Office guidance), one of whom would chair the departmental
    Audit Committee under the Board and a third who would chair the Appointments
  • Centralised or delegated? The DoD is having this very discussion about how forces should function in kinetic operations. The Levene report fudges the issue: "We do not advocate such a choice. The model we propose involves a strong Head Office to provide strategic direction, make the major balance of investment decisions, set a clear control framework and hold its delivery units to account, and delivery units which have the levers they need to run their business in line with that strategic direction and their budgets. Within that overarching corporate framework, some decisions are best made centrally and others should be devolved, some services are best provided corporately, others are best performed in the delivery units. Each needs to be worked through on its own merits, and this is what we have done."
  • When someone else is paying you can really go for it. The Daily Telegraph reported in July that senior managers over the past four years had spent over £986 000 000 of taxypayers' money on MOD credit cards and a time when the management "is grappling with a multi-billion pound black hole in its finances". Another investigation showed that the top ten managers at the MOD earned £1.7 million between them in 2010. The Levene report, in acknowledging public concerns, stressed that it was concerned with building a cost-effective model for a functioning MOD.
  • The report sees that "tackling problems in Defence acquisition must be a high priority, we regard Bernard Gray’s appointment as the Chief of Defence Materiel (CDM) as key to reforming this area. We have focussed on the responsibilities, authorities and accountabilities of the Head Office, military users and Defence Equipment and Support (DE&S) - including the CDM himself - in the Department’s model for delivering military capability and managing its finances, but we have not sought to duplicate the work Bernard Gray has set in hand on the future functions, structure and size of DE&S, and its relationship with industry. We understand that he will report to Ministers later in the year." Gray produced a report for the MOD on defence acquisition in 2009.
  • Revolution in Military Affairs predominates, being the acquisition of technology for technology's sake. In this regard, we are pressured by the United States, who are engaged in the ultimate RMA, and fear that if we don't keep up, interoperability issues will burgeon. We're hanging on to the coat tails of a management doctrine that will take us into financial armagedon. The MOD is in an unenviable position (similar to the NHS) that emerging technologies make their industry more expensive to run, rather than less expensive. The NHS has this problem with diagnostics and treatment, the MOD has this problem with weaponry. This problem has been known for a generation. Notably, Norman Augustine, when chairman of Lockheed Martin postulated one of his many Augustine's Laws regarding the DoD's ability to purchase fighter planes. The trajectory of cost of a fighter and the trajectory of DoD budgets meant that by 2054, the entire U.S. defense budget will purchase one aircraft.  It will be shared by the Air Force and the Navy 3 1/2 days each week, except in leap years, when it will be made available to the Marines for the extra day.
  • MOD as management, "brings transparency, standardisation and professionalisation to enabling processes, both to enable efficiency and to move towards filling posts with the right individuals, with the right skills, for the right length of time."
  • Levene was conscious of the history that preceded his own attempts to solve the problem, adding that no cure, as such, has been foundm that in the UK, the questions he asked also lay "behind the formation of a Committee of Imperial Defence in 1904 to organise Britain’s defence and military preparations. They have vexed Government ever since, through the Churchill reforms after the Second World War, the Mountbatten and Ismay / Jacob proposals that led to the creation of the unified MOD in 1964, the Heseltine reforms of the mid 1980s and the New Management Strategy that followed, and
    the various reforms of the 1990s and 2000s."
  • The report employs the principle of Occam's Razor, though Levene may not know it as such. He has tended towards simplicity over complexity, to aid transparency. Parsimony of approach is very well from the outside looking but when is so far up the Americans' asses that one is in front of them, and when the Americans waded into Iraq and Afghanistan, then parsimony becomes difficult.  
  • The Fog of War hangs over this report. Levene is as much in the dark as how the forces should be realigned to meet strategic threats in the 21st century as anyone else. When Levene identifies the major priorities of Defence as being to "Direct - understand the strategic context, make Defence policy and strategy, define and resource the necessary military capability and strategically direct operations
    and Defence Diplomacy, to Generate and Develop – generate force elements to meet current operations and potential military tasks and develop the future force; a key enabler of which is to: Acquire – procure and support the equipment, systems and commodities needed in the short and long term" he highlights the major problem facing the MOD - nobody really knows the strategy needed. Will we need to fight small wars or large ones? Long wars or short wars? Will we fight asymmetrically or as centres of mass against similar opponents. How will our nuclear deterrence work against the non-state actors and the mezzanine actors that operate autonomously in multiple states?
  • Working in conjunction with the already created National Security Council. 
"Those who had less experience [of the MOD] were often able to bring new ideas to the task from which we benefitted considerably"

Across the Atlantic they're having the same soul searching. Much was made in the US press of the concern levelled at Martin Dempsey at his confirmation hearing as the chairman of the JCS in late July amid mounting concerns about how adequately prepared the US is to combat cyberattacks. Regarding overspending, Dempsey was quizzed by Senator McCain.

"A group chartered by the secretary of the Army to look into how the Army procures major weapons systems found that every year since 1996, the Army has spent more than $1 billion annually on programs that were ultimately canceled. Since 2004, $3.3 billion to $3.8 billion per year of Army developmental testing and evaluation funding has been lost to canceled programs, including the now-canceled future combat system program.

As we know, the cost of the F-35 has lurched completely out of control. The few short months after the awarding of the contract to Boeing for the new tanker is now another additional $1 billion in cost. And the list goes on and on.

What -- what's the level of your concern and what do you think we ought to be doing about it?

Well, Senator, as we discussed when I was here a few months ago, I -- I would never sit here and try to justify. It would be impossible to sit here and justify the current process, given that it has not delivered the capabilities we've required within the resources available to do so.

And so, I think that we're at a point where we absolutely have to seek acquisition reform."
Later, Senator Portman adds, "But I hear just as often blame attributed to the way the department develops requirements. I'm involved, again, on this contracting issue on a broader scale in looking at, you know, the Joint Strike Fighter, for instance, where now we're looking at a projected cost overrun of $150 billion, roughly. Unbelievable."

Here's the full confirmation hearing.

Here's Dempsey, earlier at TRADOC speaking about "leader development". By the end, I'm none the wiser about the DoD intends to develop leaders in the 21st century.

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